Hi Indrajeet,
Yes, your 401(k) withdrawal will be included in your gross income and will be taxed based on your tax bracket. If you are younger than 59 1/2, not disabled and choose to cash out the funds from your 401(k), you will be subject to a 10% early withdrawal penalty and your entire 401 (k) withdrawal will be taxed as income by the U.S.
If you transfer the funds to another tax-advantaged account such as an Individual Retirement Account (IRA), then you can avoid the 10% early withdrawal penalty.
https://turbotax.intuit.com/tax-tips/retirement/an-early-withdrawal-from-your-401k-understanding-the...
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