I agree that this is not compliant with US tax favored retirement account laws ( becauee it is constituted under the laws of India and as such was not intended for the Indian market ) and may need to be treated either as an ordinary investement portfolio. However as the article points out that absent rules on when to recognize the earned interest, one could choose consistemnt treatment whether to recognize this annually or at the time of withdrawal. The fact that this does not comply with US retirement / 401 rules does not imply that it is barred from being treated as a retirement fund , especially since in the source country it is. My view is that absent any case law or a specific ruling by the IRS to contrary, the taxpayer to free to choose the most benficial interpretation as suggested by the article. For example if a taxpayer ( a resident for tax purposes or a resident ) subsequently decides to give up the residency and reptriates to India, he/she may want to NOT recognize the yearly eanred interest and opt for recognition at withdrawal.m Let the taxpayer decide on the basis of max benfit vis-a-vis longer term plans
