Introduction Retirement accounts are among the most powerful and most underutilised tax planning tools available. Whether you are a US taxpayer, an Indian professional, or an NRI managing finances in both jurisdictions, maximising your contributions to tax-advantaged retirement accounts can save tens of thousands in taxes each year — while simultaneously building long-term wealth. In […]
Retirement accounts are among the most powerful and most underutilised tax planning tools available. Whether you are a US taxpayer, an Indian professional, or an NRI managing finances in both jurisdictions, maximising your contributions to tax-advantaged retirement accounts can save tens of thousands in taxes each year — while simultaneously building long-term wealth.
In Day 8 of our 15-part series, we cover the full spectrum of retirement account options available in the US and India, how to maximise each, and the key considerations for cross-border individuals.
1. 401(k) — Employer-Sponsored Plan
– 2026 contribution limit: $23,500
– Catch-up contribution (age 50+): Additional $7,500 ($31,000 total)
– SECURE 2.0 catch-up (age 60-63): Additional $11,250
– Traditional 401(k): Pre-tax contributions; taxed on withdrawal
– Roth 401(k): After-tax contributions; tax-free growth and withdrawal
– Employer match: Free money — always contribute at least enough to get full employer match
– 2026 contribution limit: $7,000 ($8,000 if 50+)
– Deductibility phases out if you have a workplace retirement plan and income exceeds threshold
– Taxed on withdrawal
– Same contribution limits as Traditional IRA
– After-tax contributions; tax-free growth and withdrawals in retirement
– Income phase-out: Contribution eligibility phases out above $150,000 (single) / $236,000 (married)
– Backdoor Roth IRA: Allows high earners to contribute via non-deductible traditional IRA conversion
– 2026 limit: Lesser of 25% of net self-employment income or $70,000
– Ideal for self-employed individuals, freelancers, and small business owners
– Employer-only contributions
– Available to self-employed individuals with no employees (other than a spouse)
– 2026 limit: Up to $70,000 (combined employee + employer contributions)
– Allows Roth sub-account contributions
– Highest contribution limits for self-employed individuals
1. Employees Provident Fund (EPF)
– Mandatory for employees in companies with 20+ employees
– Employee contributes 12% of basic salary; employer matches
– Interest rate set annually (currently ~8.1%)
– Tax treatment: EEE (Exempt-Exempt-Exempt) for most withdrawals
– Annual contribution: Minimum Rs 500, maximum Rs 1.5 lakh
– Lock-in: 15 years with partial withdrawal options
– Interest rate: Government-set (~7.1%)
– Tax treatment: EEE — contributions deductible under Section 80C, interest exempt, withdrawals exempt
– Tier I Account: Mandatory lock-in until age 60
– Contribution deductions: Up to Rs 1.5 lakh under Section 80CCD(1); additional Rs 50,000 under Section 80CCD(1B)
– Employer contribution: Up to 10% of basic salary, fully deductible as business expense
– At retirement: 60% lump sum (tax-free); 40% must be annuitised
1. NRIs and Indian Retirement Accounts
– NRIs cannot contribute to PPF
– NRIs can contribute to NPS (Tier I and II)
– EPF accounts of NRIs who have left India: Interest may become taxable as NRI status changes
– The US does not recognise EPF, PPF, or NPS as tax-deferred accounts
– Contributions to these accounts may need to be reported as foreign financial accounts (FBAR, Form 8938)
– Income within these accounts may be taxable in the US unless treaty protection is claimed
– The India-US DTAA does provide some protection for certain pension-like accounts under Article 20
– India does not recognise 401(k) or IRA as tax-deferred
– Contributions to 401(k) are not deductible in India
– Distributions from US retirement accounts are taxable in India (subject to DTAA relief)
For US Residents:
1. Contribute to 401(k) up to employer match minimum
2. Max out HSA if eligible ($4,300 individual / $8,550 family) — triple tax advantage
3. Max out Roth IRA (or backdoor Roth if income too high)
4. Return to 401(k) and max out to $23,500 limit
5. Use SEP-IRA or Solo 401(k) for self-employment income
1. Maximise EPF through voluntary additional contributions
2. Contribute Rs 1.5 lakh to PPF annually
3. Contribute Rs 50,000 to NPS for additional Section 80CCD(1B) deduction
4. Consider employer NPS contribution structure for additional deductions
Retirement accounts offer one of the highest returns on investment in tax planning — legally reducing current-year taxes while building a tax-advantaged or tax-free retirement fund. Cross-border individuals face additional complexity but also additional opportunity.
In Day 9, we cover Regulatory Arbitrage Techniques — how businesses legally exploit differences in regulatory environments across jurisdictions to reduce costs, taxes, and compliance burdens.
Moiz Ezzi is a Certified Public Accountant (CPA) and Chartered Accountant (CA) specialising in cross-border tax advisory for multinationals, NRIs, and non-US founders with India-US and India-global operations. He advises clients across transfer pricing, international holding structures, DTAA planning, and entity structuring.
Connect with Moiz Ezzi on LinkedIn for weekly cross-border tax insights.
