Topic 4:- FATCA Compliance for Indians With HDFC Mutual Funds

If you hold investments in HDFC Mutual Fund, you are part of a global reporting network. Because India signed an Inter-Governmental Agreement (IGA) with the U.S., HDFC is legally required to identify and report “U.S. Persons” to the Indian tax authorities, who then share that data with the IRS. In 2026, this automated exchange is faster and more precise than ever.

1. The Mandatory FATCA Self-Declaration

Every investor in HDFC Mutual Fund must submit a FATCA/CRS Self-Certification. This isn’t just a formality; it’s a gatekeeper for your account.

• What you declare: Your tax residency (U.S.), your Social Security Number (SSN) or ITIN, and your place of birth.
• Consequences of Ignorance: If HDFC does not have your FATCA declaration on file, they are mandated by the CBDT (India’s tax board) to freeze your folio. You will be unable to redeem your money or make new SIP contributions until the form is processed.

2. Form 8938: The “Asset Value” Thresholds

While HDFC reports your data to the government, you must also report your HDFC holdings to the IRS using Form 8938 (Statement of Specified Foreign Financial Assets). This is required if the total value of all your foreign assets (including HDFC funds, bank accounts, and insurance) hits these limits:

3. Reporting “Specified Assets” vs. Bank Accounts

A common mistake is thinking that if you reported your HDFC Bank Account on the FBAR, you’ve covered your HDFC Mutual Fund.

• FBAR (FinCEN 114): Focuses on the bank account itself (NRE/NRO).
• FATCA (Form 8938): Focuses on the assets within the account. Because HDFC Mutual Funds are “securities,” they must be detailed individually on Form 8938, including the maximum value during the year and any income (dividends/gains) they generated.

4. Penalties: The Cost of Non-Compliance

The IRS has significantly increased its focus on unreported foreign assets in 2026.

• Failure to File Form 8938: Starts at a $10,000 penalty.
• Continued Failure: If you don’t respond to an IRS notice, the penalty can climb by $10,000 every 30 days, up to a maximum of $50,000.
• Understatement Penalty: A 40% penalty applies to any tax underpayment linked to an undisclosed foreign asset.

How KKCA Secures Your Status

We ensure your HDFC folio doesn’t become a liability:

• Digital FATCA Sync: We assist in updating your self-certification via CAMS or HDFC’s portal to ensure your funds remain “active” and liquid.
• Folio Aggregation: We help you consolidate multiple HDFC folios into a single USD-denominated report for Form 8938, ensuring no asset is accidentally omitted.
• Tax Reconciliation: We verify that the income reported by HDFC to the Indian government matches exactly what you are claiming on your U.S. 1040, preventing “red flag” discrepancies.

Call to Action

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

Frequently Asked Questions (FAQ)

Q: Does HDFC report my specific SIP transactions to the IRS? A: HDFC reports your year-end balance and gross proceeds from redemptions. The IRS then looks for matching “Form 8621” or “Form 8938” filings on your U.S. return.

Q: I have a “Minor” account for my child in HDFC. Does that need FATCA? A: Yes. If the child is a U.S. citizen (even if living in India), the account is reportable. The parent usually signs the FATCA declaration as a guardian.

Q: What if I have an HDFC Life Insurance policy? A: If the policy has a “cash value” (like a ULIP), it is a reportable asset under FATCA and must be included in your Form 8938 totals.

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.