EPF (Indian provident fund) and U.S. taxes: what to report, what to check
Have an Employees' Provident Fund (EPF) balance from a job in India? Here is what to report, what to check before you withdraw, and what to bring. Keshav Agrawal is a U.S. CPA and a Chartered Accountant (CA) from India, so your passbook and the IRS forms get read side by side.
Prepared by Prem Tax and Accounting Corp. Last checked against official sources on October 23, 2026.
The short answer
If you are a U.S. citizen, green card holder or U.S. tax resident with an EPF balance, treat it as a decision to make on purpose. The IRS, FinCEN and the Illinois Department of Revenue have published nothing on Indian EPF by name, so the FBAR, Form 8938, Forms 3520 and 3520-A and income tax questions are unsettled. The IRS does say foreign retirement plans are normally reportable on the FBAR, and Form 8938 has its own foreign pension plan rule. Settle a position with a CPA, apply it every year, and keep your records.
What changed in India in 2026
- New EPF Scheme, 2026, notified June 29, 2026 (G.S.R. 525(E)). It replaces the 1952 Scheme.
- Wage ceiling for required contributions: INR 25,000 a month from September 17, 2026, up from INR 15,000.
- A 12-month wait before full withdrawal (it was 2 months) after you leave covered employment, with exceptions such as retirement at 55 and leaving India: full withdrawal is allowed immediately before migration for permanent settlement or employment abroad.
- Partial withdrawals leave 25% in. You need 12 months of membership, and 25% of contributions plus interest must stay as a minimum balance.
- Interest stops once an account is inoperative. Under the 2026 Scheme, that happens if a member who retired after 55, migrated abroad permanently or died files no withdrawal application within 36 months of it becoming payable.
The U.S. side at a glance
| Filing or tax | What the rule says | What is unsettled |
|---|---|---|
| FBAR (FinCEN Form 114) | Required when foreign accounts total over $10,000 at any time in the calendar year (2026 report: April 15, 2027). The retirement-plan exception covers only U.S. plans; the IRS manual (IRM 4.26.16, August 2025) calls foreign plans such as a Canadian RRSP normally reportable. | Neither FinCEN nor the IRS names EPF, so there is no official answer on whether EPF is an account the FBAR covers. |
| Form 8938 | A foreign pension plan interest goes in Part VI, valued at year-end fair market value (or the year's distributions, if that value is not readily available). Tax year 2026, unmarried filers in the U.S.: over $50,000 at year end or $75,000 at any time. | Foreign social security is not reportable, but the instructions exclude foreign pension plans from that. Nothing official says where EPF, or its Employees' Pension Scheme (EPS) part, falls. |
| Forms 3520 and 3520-A | Revenue Procedure 2020-17 excuses an eligible individual from these forms for a tax-favored foreign retirement trust meeting six tests, such as local tax favor, annual local reporting and capped contributions. FBAR and Form 8938 duties remain. | No IRS statement says EPF qualifies. Open: whether EPF is a foreign trust at all, and whether it meets the reporting, withdrawal and nondiscrimination tests. |
| U.S. income tax | For a funded foreign plan not exempt under IRC 501(a), the general rule is IRC 402(b): employer contributions are included as they vest, and distributions are taxed under section 72. In the 1989 treaty, a pension means a periodic payment; its Technical Explanation puts lump sums under Other Income. | No IRS guidance applies this to EPF. Whether EPF or EPS is a public pension or social security benefit under treaty Article 20(2) is open. No U.S.-India totalization agreement exists, and Illinois has published nothing on Indian EPF by name. |
| Foreign tax credit (Form 1116) | Credit only for the legal and actual foreign income tax you owe, and none where a refund is reasonably certain. Treaty Article 25 lets citizens and residents credit Indian income tax. | Whether Indian tax withheld on an EPF withdrawal is creditable depends on it being a final Indian tax on income also taxed in the U.S. No IRS guidance addresses EPF. |
Before you withdraw: checklist
- Fix the date. Apart from retirement at 55 and a few other grounds, full withdrawal means a 12-month wait out of covered employment, or withdrawal immediately before migration. Your withdrawal date against your U.S. residency start date can matter (green card holders are already residents).
- Check Indian tax first with your Indian adviser. It depends on years of continuous service and why service ended, and Indian TDS applies only where the balance is taxable.
- Withdraw or transfer? With a new covered job you can transfer the balance online; withdrawing and re-joining makes you a fresh member.
- Check KYC and the e-Passbook. You need Aadhaar, an Aadhaar-seeded bank account, PAN and UAN; passbook errors must be reported within three months. Payment goes to an Indian bank or post office account, so plan the transfer.
- Use the right exchange rate. FBAR: the Treasury rate for the last day of the year. Income and Form 1116: the IRS yearly average (2025: INR 87.133 per USD) or another posted rate used consistently.
What to bring to your appointment
- Your UAN and the member ID of each employer's EPF account.
- Passbooks and annual statements for every year with a balance.
- Withdrawal or transfer papers, including any Indian TDS certificate.
- Residency dates: when you moved to the U.S. and left India, and your visa and green card dates.
- Prior filings: U.S. returns, FBARs, Forms 8938, 3520 and 3520-A, and any Indian return showing the EPF.
Common questions
Does my EPF go on the FBAR?
No official source names EPF. The IRS says foreign retirement plans, such as a Canadian RRSP, are normally reportable on the FBAR. The cautious starting point is to count your EPF balance toward the $10,000 total for 2026, then settle your position with a CPA and apply it every year.
Is EPF a foreign trust that needs Forms 3520 and 3520-A?
Unsettled. Revenue Procedure 2020-17 excuses a qualifying tax-favored foreign retirement trust, but no IRS statement says EPF is a foreign trust or meets the tests. If the forms were required and missed, the initial Form 3520 penalty is the greater of $10,000 or 35% of the gross value of the distributions (December 2025 instructions); reasonable-cause relief exists.
Is EPF interest tax-free in the U.S. if India does not tax it?
Nothing in the treaty or IRS guidance supports that. A U.S. resident is taxed on worldwide income, and the IRS has no ruling on EPF, so settle one reasoned, documented position and apply it each year.
How do the 2026 India changes affect my U.S. reporting?
They change timing, not the forms: when you can withdraw, and whether a balance keeps earning interest. If you report EPF, a balance left behind stays in your FBAR and Form 8938 totals even after interest stops.
I never reported my EPF. What now?
Talk to a CPA before you file anything. If the failure was non-willful, the IRS streamlined procedures may fit: for people living in the U.S., three years of returns, six years of FBARs, a signed non-willful certification and a 5% penalty on the highest aggregate balance of the foreign assets. Only certify what is true. FBAR penalties (adjusted January 2025) reach $16,536 per report if non-willful, and the greater of $165,353 or 50% of the balance if willful.
Official sources
- PIB: EPFO Central Board of Trustees, 238th meeting (October 13, 2025)
- FinCEN: Report foreign bank and financial accounts
- IRS: Internal Revenue Manual 4.26.16 (FBAR)
- IRS: Instructions for Form 8938
- IRS: Revenue Procedure 2020-17 (foreign retirement trusts)
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