India accounts, mutual funds, property and gifts: U.S. tax rules
India bank accounts, mutual funds, family property and gifts from parents each have U.S. reporting rules, and the penalties for missing them are heavy. Here is each one, in plain English.
Prepared by Prem Tax and Accounting Corp. Last checked against official sources on October 9, 2026.
What goes where
| India item | Report it on |
|---|---|
| Savings, NRE, NRO, fixed deposit accounts | FBAR if the total passes $10,000; Form 8938 if over the threshold; the interest on Schedule B |
| Mutual funds and similar pooled funds | Form 8621 (PFIC) and Form 8938 |
| Shares of Indian companies you hold directly | Form 8938, and dividends and gains on your return |
| PPF, EPF, NPS and similar schemes | Often FBAR and Form 8938. Tax treatment varies |
| Property you own directly in India | Not on Form 8938. Rent and gain are on your return, with the foreign tax credit |
| Gifts from relatives abroad over $100,000 | Form 3520 |
The thresholds
| FBAR (FinCEN 114) | Form 8938 | |
|---|---|---|
| Who files | U.S. citizens, residents and entities | Specified individuals and entities with foreign financial assets |
| Threshold | More than $10,000 total at any time | U.S. resident: over $50,000 at year end or $75,000 at any time (joint: $100,000 and $150,000) |
| Where filed | Electronically with FinCEN, not with your return | With your tax return |
| Penalty | Non-willful: thousands per report; willful: much more | Up to $10,000, with more for continued failure |
Indian mutual funds and the PFIC problem
Most foreign mutual funds are passive foreign investment companies. Under the default rules, gains and distributions can be taxed at the highest rate with an interest charge, and you must file Form 8621 for each fund each year. There are elections that can reduce the damage, so the earlier you act, the better.
Rent, sale and the foreign tax credit
- Rent from India property is taxable. Foreign residential rental property is depreciated over 30 years, not 27.5.
- Sale: compute gain in U.S. dollars, using the exchange rate on the purchase date and the sale date. Currency movement can create or erase gain.
- Foreign tax credit: Indian income tax you paid on the same income can usually be credited on Form 1116, within limits.
Common questions
Do I have to report a small account in India?
The FBAR applies when the total of all your foreign accounts is more than $10,000 at any time in the year, so several small accounts can add up. Include savings, NRE, NRO, fixed deposits and accounts you can sign on, even if you did not open them.
What is a PFIC and why does it matter for Indian mutual funds?
A passive foreign investment company includes most foreign mutual funds and similar pooled funds. The U.S. taxes them under harsh default rules with extra tax and interest, and requires Form 8621 each year. Many Indian mutual funds fall in this group.
Are PPF, EPF and NPS accounts reportable?
They are often treated as foreign financial accounts for reporting, and the U.S. does not generally treat them like a U.S. retirement plan, so the income may be taxable currently. The rules depend on the account. Ask us before you decide.
I got money from my parents in India. Is it taxable?
A gift is not income to you. But a gift from a foreign person over $100,000 in a year is reported on Form 3520. The late-filing penalty starts at 5% of the gift for each month, up to 25%.
Do I report an inherited flat in India?
An inheritance is generally not income. If you rent it out, the rent is taxable. If you sell it, the gain is taxable, measured from its value when you inherited it. Reporting depends on how you hold it, so get advice before you sell.
Official sources
- IRS: Comparison of Form 8938 and FBAR requirements
- FinCEN: Report foreign bank and financial accounts
- IRS: Form 8621 (PFICs)
- IRS: Form 3520 (foreign gifts and trusts)
- IRS: Foreign tax credit
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