401(k) and IRA: What Happens If You Move Back to India

401(k) employee contribution limit, 2026	$24,500 (catch-up $8,000 at 50+, $11,250 at 60–63)	Source
IRA contribution limit, 2026	$7,500 (catch-up $1,100 at 50+)	Source
Additional tax on early distributions	10% of the taxable amount before age 59½, unless an exception applies	Source

Can I keep my 401(k) if I move back to India?

Yes. A 401(k) does not have to be closed when you leave the US or your employer. You can leave it in the plan, roll it to an IRA, or withdraw it, and each choice has different tax and practical consequences.

Option	Pros	Cons
Leave it in the 401(k)	Simple; money stays invested tax-deferred	Limited fund choices; plan may restrict foreign addresses
Roll to an IRA	Wider investment choice; one account to manage	Some brokerages limit accounts for non-residents
Withdraw before 59½	Cash now	Income tax plus 10% additional tax, unless an exception applies
Withdraw after 59½	No additional 10% tax	Still taxable; coordinate with Indian tax

Should I cash out my 401(k) before leaving the US?

Usually not. An early distribution is taxed as income and, before age 59½, generally adds a 10% additional tax, so a cash-out can lose a large slice of the balance compared with leaving it invested.

The IRS lists exceptions to the 10% tax, including distributions after you separate from service with your employer at age 55 or older, and distributions due to total and permanent disability (IRS Topic 558). The tax is reported on Schedule 2 of Form 1040.

How are 401(k) withdrawals taxed when I live in India?

The US generally still taxes distributions from a US plan, and India may tax them too once you are an Indian resident. The US–India tax treaty and foreign tax credits are what prevent paying twice, so plan withdrawals with an adviser who works in both systems.

Read the treaty article on pensions with your adviser (US–India treaty).
The timing of withdrawals relative to your Indian residential status can change the result.
Keep US account statements: you may need them for Indian tax filings.

What should I do with my US accounts before I move?

Confirm each provider will keep your account open with an Indian address, update your address and tax status where required, and consolidate where it makes sense, so you are not managing many small accounts from abroad.

Ask your 401(k) plan and IRA custodian about non-resident policies.
Consider rolling old 401(k)s into one IRA while you still have a US address.
Keep at least one US bank account and card for US bills and transfers.
Keep filing FBAR-style records of Indian accounts until your final US-resident tax year.

What happens to my NRE and NRO accounts when I return?

Once you are a resident of India again, your NRE and NRO accounts must be redesignated as resident accounts, and NRE interest stops being tax-free in India. FCNR(B) deposits can generally run to maturity.

See NRE, NRO and FCNR accounts. A dedicated guide to converting accounts and RNOR status is in our planned guides.

Before you move

Do not cash out without a tax calculation
Check non-resident policies at your 401(k) plan and IRA custodian
Consolidate old 401(k)s into an IRA
Keep one US bank account and card
Book a session with a cross-border tax adviser

Frequently asked questions

Can I keep contributing to an IRA after moving to India?

IRA contributions require taxable compensation that counts for US purposes. After you move and stop earning US-taxable income, you generally cannot contribute; ask your adviser if you will have US-taxable earned income.

Is a Roth IRA better if I might move back?

Qualified Roth withdrawals are tax-free in the US, but India may not treat them the same way. The answer depends on your timeline and both countries’ rules.

What are the 2026 contribution limits?

$24,500 for 401(k) employee deferrals and $7,500 for IRAs, with higher catch-up amounts for people aged 50 and over.