| No. | Foreign Financial Accounts ^ | Reported in FBAR?^ | Example* |
| 1 | Financial (deposit & custodial) accounts held at foreign financial institutions | Yes | Account with Indian Bank e.g. Kotak in India |
| 2 | Financial account held at a foreign branch of a U.S. financial institution | Yes | Account with US Bank e.g. Citi Bank in India |
| 3 | Financial account held at a U.S. branch of a foreign financial institution | No | Account with Indian Bank e.g. SBI in USA (Chicago Branch) |
| 4 | Foreign stock or securities held in a financial account at a foreign financial institution | Yes, Account to be reported; Account contents not separately reported | Shares or Debentures of Indian Companies held in financial Account at Financial Institution in India |
| 5 | Foreign mutual funds | Yes | Indian Mutual Funds e.g. Reliance MF, HDFC MF, etc. |
| 6 | Foreign-issued life insurance or annuity contract with a cash-value | Yes | Surrender Value of Life Insurance Policies |
| 7 | Foreign financial account for which you have signature authority | Yes, subject to exceptions | Joint Account with Parents or other family members |
| 8 | Indirect Interest in foreign financial assets through an entity | Yes, subject to conditions | Own an entity that invests in mutual funds in India |
| 9 | Domestic mutual fund investing in foreign stocks and securities | No | US based mutual fund with India focus invested in USA |
| 10 | Foreign stock or securities not held in a financial account | No | |
| 11 | Foreign Partnership Interests | No | |
| 12 | Foreign hedge funds | No | |
| 13 | Foreign private equity funds | No | |
| 14 | Foreign real estate held directly | No | |
| 15 | Foreign real estate held through foreign entity | No | |
| 16 | Foreign currency held directly | No | |
| 17 | Precious metals held directly | No | |
| 18 | Personal property(e.g. art, antiques, jewelry, cars and other collectibles) | No | |
| 19 | Social Security-type program benefits provided by a foreign government | No |
^ Source: http://www.irs.gov/businesses/article/0,,id=255986,00.html
* Example is provided for better understanding only and is for general information purposes only.
Comments
Kalpesh
I have 3 queries related to FBAR submission.
1. Public provident Fund investment in India : This is like 401 plan which we have started investing money 15 years back when we were in Inda. From the day on opening account, every year we were investing Rs. 70000 in account. As per India IT rule, principal and interest both are exempted from tax deduction at the time of withdrawal / closing of account. If we need to report 2011 balance amount this year through FBAR form then does IRS charge tax at USA on accumulated amount worth USD 44000?
2. DMAT account for tax free bonds of India : Investment in tax free bonds in India through DMAT account, does IRS charge tax in USA of invested amount of $ 13000?
3. Mutual fund investment in India through NRI account : From 2006 I have started investing $ 250 per month through my NRI account and as on 31/12/2011, accumulated amount reaches around USD 11000. This I have invested after deducting tax at USA and dividend earned on invested amount was reinvested in same mutual funds. Does IRS charge tax on this mutual funds of last year accumulated balance or in future at the time of withdrawal?
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
Two compliance requirements are different:
1. Reporting of Income taxable (Form 1040) to the IRS
2. Reporting of Foreign Financial Assets under FBAR (Form TD 90-22.1) to the Department of Treasury.
1. For US residents, global income is taxable that includes PPF Interest, interest on tax free bonds in India as well as mutual funds. Interest on PPF balance and Tax free bonds are free of income tax as per provisions of Indian Income Tax laws and has nothing to do with IRS.
2. FBAR Form is to be submitted to Department of Treasury and NOT IRS. It is like FYI that you own certain foreign financial assets. If those assets generate any income, you would show them on your 1040 to IRS. From Tax year 2011 (Due date April 15, 2012), IRS also introduced Form 8938 for certain taxpayers to link Foreign financial assets and income generated therefrom and where you have shown the income in 1040.
Please note that 8938 requirement is new, effective from calender year 2011 tax returns whereas FBAR requirement is old.
Please read all three blogs related to FBAR and links provided in FBAR3 for details. If any question, let me know. Thanks for reading and providing your comments.
M. patel
Are Interest income from NRO fixed deposits/NRO savings account, which I believe are non repetriatble has to be reported in IRS form 1040 and schedule B?
Is dividend income from SBI mutual stock funds which are held under NRO status to be reported on IRS 1040 form?
All above are originally sourced in India since they are part of inheritance and no funds are transferred from US to India.
Your reply is much appreciated. Thank you.
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
Please contact the licensed CPA practicing in the USA for your US taxes or compliance. Following information is provided for educational/information purposes:
1. Yes, any interest income – whether NRO saving, FD, NRE saving, FD, is taxable in USA and needs to be reported in 1040.
2. Yes, While Dividend income is tax free in India as companies/mutual funds pay dividend distribution tax, it is taxable in the USA.
3. Source of funds are not important. As global income is taxable for US Residents, you need to include it in your income. Depending on the amount of your investments, you may also have to file Form 8938 to IRS or FBAR to Department of Treasury.
As mentioned, please contact the CPA in USA for your compliance. Thanks.
Kalpana Pendurty
Hi,
You indicated in one of your replies to Mr. Kalpesh above that dividend income from Indian mutual funds is taxable in the US even if the dividend paid out was after the deduction of the Dividend Distribution Tax. I presume this is the case for all US citizens whether residing in India or US or elsewhere. Please confirm.
My second question relates to the following article in TOI regarding Indian mutual funds and related capital appreciation. The article implies that as US citizen I would need to pay tax on unrealized capital gains on Indian mutual funds even before I actually realize those gains from sale of the mutual funds. Which is the most common method that people elect? Please advise.
http://timesofindia.indiatimes.com/nri/us-canada-news/How-NRIs-India-mutual-funds-are-taxed-in-US/articleshow/12882183.cms
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
1. US citizens are “US residents” for income tax purpose. IRS does not differentiate taxability of any income whether the person is residing in USA or in any other country.
2. The article is correct. Most people will contact their CPA in USA and would follow his advise. If no CPA, I would recommend to file Form 8621, show the unrealized income and pay tax. Thanks.
Kalpana Pendurty
Mr. Patel,
I am hoping to talk to you regarding my 2013 US tax return. I emailed you yesterday (Fri) with details. I need assistance from you or your team who is well versed in NRI taxation with regards to investments I have in Indian MFs. I tried calling at the 773 number but it is going to voicemail.
What is the best time and way to reach you? Would appreciate your reply here or to my email.
Thank you!
Kalpana
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
Thanks for contacting us. Replied to your email. Thanks.
Kalpana Pendurty
If i have investments in various HDFC mutual funds (for e.g., HDFC Top 200, HDFC Balanced, HDFC Equity, etc.), can I combine the maximum account values across all the HDFC funds and report as one item on FBAR? Or would i need to list each HDFC mutual fund separately along with its maximum account value on the FBAR form.
Please advise.
Thanks!
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
You would report separately by your folio number and find the maximum amount or Dec 31 amount converted into USD and report. Thanks.
Vinay
Mr Jigar,
I have 14 FDs inside NRO acct. Each FD has an account number. I also have NRE acct. When filling FBAR form, should I mention I have two accts (NRE and NRO) or 16 accts (incl 14 FDs)?
Also, do I have to list each of the 16 amounts separately or can I list just one total NRO sum of 15 (NRO acct+14 FDs) and one for the NRE acct?
Because the maximum amount in each acct has to be listed, I am concerned that listing separately could cross the $100,000 threshold as amounts will be counted twice due to transfer between NRO and FD.
Finally, if I have given a personal loan to a relative in India, is it to be listed on any of the forms?
Thanks a very lot.
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
It would depend on how you have been reporting consistently. You would also have a unique customer ID. You may also choose to report by Customer ID or your NRO or NRE account as FD would be linked to respective account. Once you know how you want to report, you would group the accounts and amounts respectively. Also, I don’t think the personal loan to relative needs to be reported in FBAR or Form 8938. Thanks.
Vinay
Thank you, Mr. Jigar. That is helpful to know.
May I ask if your services are available to file personal tax returns of Indians like us who are settled abroad? I am in USA and need to file taxes with IRS.
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
We provide support in filing your tax return and help you in any compliance. We gather data, records and information and provide the same to you for filing tax return but we do not take responsibility or file your tax returns or any forms. Please contact us if you have any such requirement. Thanks.
Ramesh
Hi Jigar,
I’m a H1B worker, residing in USA since May 2012. In 2014, I have withdrawn my total PF balance (about 10000 USD) in India. Since I was employed for more than 5 years with my last Indian employer, this amount is not taxable in India.
My question is, do I need to pay tax in USA for this PF withdrawal amount in India. If I have to pay the taxes, do I need to pay on the whole amount including my contributions, employer contributions and interest or only on interest part of it? What tax % is applicable for this amount? Please help.
Regards,
Ramesh
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
Please note that the tax is only on the income i.e. interest. I would think the employer contribution is already part of your CTC and you may have paid the tax on the same in India. you may also contact your CPA for any clarification about taxing PF balance. Thanks.
Siddharth Verma
Should PPF be reported on FBAR
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
Yes, I would think so. Thanks.
Ravi
Hi Naresh Ji, I thought NRI Deposits with Citibank in India do not need to be reported via Form FBAR but you said above they need to be reported, the same is not needed for Form 8938, can you please clarify on this. Also if someone did not file the Form FBAR, from which year they need to file the Delinquent Form FBAR
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
Please check IRS webpage that explains and compares the accounts that needs to be reported in Form 8938 and FBAR: http://www.irs.gov/Businesses/Comparison-of-Form-8938-and-FBAR-Requirements
Ravi
Thank You!, I have another question, I have not filed Form FBAR ever but I used to pay taxes on the NRI Account Balance Interest which were reported in From 1099-INT for last 6 Years, should I go ahead and file FBAR for Current Year 2014 and Delinquent for the past years, is it beneficial or harm in filing the Delinquent FBAR for past 5 years or so, appreciate your time and help
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
I would suggest you to explore Streamlined Compliance procedures wherein you may file deliquent FBARs and pay 5% penalty. However, I would strongly suggest you to consult your CPA before taking any action. Thanks.
Varun
Hi Naresh,
I am transferred from Indian IT company to USA branch. But I am having a EPF (Employee provident fund) account with my companies Indian branch which I suppose comes in
19 Social Security-type program benefits provided by a foreign government
as per your blog(http://nareshco.com/blog/?p=95) .
So please can you guide whether EPF falls under point 19? Also should I need report that in FBAR.
Thanks
Varun
Jigar Patel, CFA (USA), MBA-Finance (USA), CPA (USA), CA (India)
While Social Security type programs may not be reported, I am not sure if EPF can be counted as the same. You may withdraw EPF at anytime. Also, when in doubt, it is better to be conservative and report. Thanks.