REITs and Indian Property: Reporting Global Real Estate Income

REITs and Indian Property: Reporting Global Real Estate Income in 2026

For many Indian professionals in the U.S., real estate remains the preferred investment vehicle back home. Whether it’s a family apartment in Mumbai or a high-yield REIT like Embassy Office Parks, the IRS expects full transparency.

In 2025, we saw many clients struggle with the “Double Taxation” myth—the belief that paying tax in India means you don’t have to report it in the U.S. This is incorrect. Here is how to handle your Indian real estate assets for the 2025 tax year.

1. Indian REITs: The Stealth PFIC

Indian Real Estate Investment Trusts (REITs) like Embassy, Mindspace, and Brookfield have gained massive popularity. However, for a U.S. tax resident, they are rarely treated as simple stocks.

• The PFIC Classification: Most Indian REITs are classified as Passive Foreign Investment Companies (PFICs).
• The Reporting: This means you must file Form 8621 for each REIT holding.
• The Tax: Without a “Mark-to-Market” or “QEF” election, your dividends and capital gains could be taxed at rates as high as 37% plus interest.

2. Rental Income from Indian Property

If you own physical property in India and collect rent, it must be reported on Schedule E of your Form 1040.

• Gross Rent: You must report the total rent received, converted to USD using the IRS average yearly exchange rate.
• Deductions: You can deduct property taxes, repairs, management fees, and insurance.
• Depreciation: You cannot use the Indian “30% standard deduction.” Instead, you must depreciate the property over 30 years (for residential) or 40 years (for commercial) using the straight-line method.
• Foreign Tax Credit (Form 1116): If India withheld tax (TDS) on your rent, you can claim a credit against your U.S. tax liability to avoid paying twice on the same dollar.

3. Selling Property in India

Selling a home in India triggers complex reporting in both countries.

• The Gain Calculation: The IRS does not recognize “Indexation” (inflation adjustment) as India does. You must calculate your gain based on the original purchase price in USD (at the exchange rate of the purchase date) versus the sale price in USD (at the exchange rate of the sale date).
• The Primary Residence Exclusion: If you lived in the Indian home as your primary residence for at least 2 out of the 5 years before the sale, you may exclude up to $250,000 ($500,000 if married filing jointly) of the gain from U.S. tax under Section 121.

4. FATCA and FBAR Requirements

Your Indian property itself isn’t reported on the FBAR, but the bank account where the rent is deposited or the sale proceeds are held is.

• Form 8938 (FATCA): If the total value of your foreign financial assets (including REITs and specific financial interests in property) exceeds the thresholds (e.g., $200,000 for single expats), you must disclose them.

The KKCA Compliance Checklist

Missing these filings can lead to significant penalties—often starting at $10,000 per violation. At KKCA, we specialize in reconciling Indian property records with U.S. tax laws.

Our 2025 Audit Strategy Includes:

1. Exchange Rate Optimization: Using the correct historical rates to minimize capital gains.
2. REIT Diagnostics: Determining if your Indian REIT qualifies for a favorable tax election.
3. Cross-Border Credits: Ensuring every rupee of TDS paid in India is credited against your U.S. bill.

Looking for personalized tax services about your specific tax situation, please contact us. We are here to help you with your specific tax matters.

Disclaimer

This blog is intended for informational purposes only and does not constitute legal or tax advice. Please consult a qualified U.S. CPA or tax attorney for guidance specific to your situation.