Many Indian-origin taxpayers living in the U.S. struggle with how to report income earned in India especially when their CPA doesn’t specialize in NRI taxation. One wrong move can lead to double taxation, incorrect FBAR filings, PFIC penalties, or IRS notices.
If you have foreign bank accounts, Indian mutual funds, rental property, or receive income from family businesses back home a regular CPA might not be enough.
Let’s break down how to report Indian income on your U.S. return in 2025, and why working with a cross-border tax expert makes all the difference.
Problem Statement: Traditional CPAs May Not Understand Cross-Border Tax Law
Indian-Americans often work with CPAs who:
- Do not understand the India-U.S. tax treaty
- Fail to file Form 8621 for Indian mutual funds
- Omit Form 3520 for foreign gifts
- Misreport Indian rental income or ignore TDS credits
- Miss deadlines for FBAR and FATCA filings
This can lead to audit triggers, penalties, or missed deductions and worse, unnecessary double taxation.
At Kewal Krishan & Co, we specialize in handling complex NRI income issues. Our clients have saved up to $50,000 annually, translating into $1M+ in long-term tax savings with better structuring and disclosures.
Applicable Tax Laws & Forms
- IRC §61: All worldwide income is taxable for U.S. tax residents
- IRC §901: Allows foreign tax credit on Indian taxes
- IRC §1291: PFIC regime applies to Indian mutual funds
- India-U.S. Tax Treaty: Mitigates double taxation
- Form 8938 & FinCEN 114: FATCA and FBAR reporting
- Form 8621: Required for each Indian mutual fund if PFIC applies
- Form 1116: Claiming foreign tax credits
Common Types of Indian Income to Report
| Income Type | U.S. Reporting Form |
|---|---|
| Bank Interest (NRE/NRO) | Schedule B + FBAR/Form 8938 |
| Rental Income | Schedule E + FTC via Form 1116 |
| Indian Mutual Funds | Form 8621 + Schedule D (if PFIC) |
| Capital Gains on Shares | Schedule D |
| Indian Salary Income | Form 1040 + Form 1116 |
| Dividends | Schedule B |
Detailed Example: Indian Rental Income + Mutual Funds
Suppose you earn ₹6,00,000 in rent (≈$7,500) and pay ₹1,80,000 in Indian taxes (≈$2,250). You also have ₹10,00,000 (≈$12,500) in Indian mutual funds.
Your 2025 tax filing will include:
- Schedule E: Reporting the rental income in USD
- Form 1116: Claim foreign tax credit
- Form 8621: Report each Indian MF as PFIC (if applicable)
- Form 8938 & FBAR: Report bank balances over $10,000
Step-by-Step Compliance Guide
- Convert Indian Income to USD
- Use IRS Yearly Average Exchange Rate
- Determine U.S. Tax Residency
- Apply Substantial Presence Test or check for dual-status
- Disclose All Foreign Accounts
- File FBAR if aggregate balance exceeds $10,000
- File Form 8938 if value exceeds FATCA thresholds
- File Foreign Tax Credit
- Use Form 1116 to claim Indian TDS
- Handle PFIC Reporting
- Use Form 8621 if holding Indian mutual funds or ULIPs
- Disclose Foreign Gifts
- Form 3520 if you received >$100K from parents in India
Conclusion: Don’t Let Complex NRI Taxes Derail You
Indian income can easily complicate your U.S. tax return especially when PFICs, foreign tax credits, and disclosure forms are involved. Most generalist CPAs simply aren’t equipped to handle these nuances.
Choose a CPA who understands cross-border rules, Indian income structures, and U.S. compliance traps so you stay safe, compliant, and optimized.
Call to Action
Work with Anshul Goyal, CPA EA FCA a U.S.-licensed Certified Public Accountant, IRS-authorized Enrolled Agent, and NRI tax expert. He represents clients before the IRS and specializes in tax strategies for Indian-Americans and their families.
We recommend discussing your Indian income with our CPA to avoid mistakes and reduce taxes legally.
About Our CPA
Anshul Goyal, CPA EA FCA is an experienced tax professional authorized to represent clients before the IRS. He focuses on cross-border tax planning, FBAR/FATCA compliance, PFIC reporting, foreign tax credits, and U.S.-India treaty interpretation for NRIs.
Disclaimer
This blog is for educational purposes only and does not constitute tax or legal advice. Individual circumstances vary, and tax laws can change. Consult a qualified professional such as Anshul Goyal, CPA EA FCA for personalized tax guidance.
Top 5 FAQs
1. Do I need to report Indian interest income in the U.S.?
Yes. Even if tax-free in India, interest on NRE/NRO accounts is reportable in the U.S.
2. Can I claim a tax credit for Indian TDS?
Yes. You can use Form 1116 to claim a foreign tax credit against U.S. liability.
3. Are Indian mutual funds considered PFICs?
Yes, under IRS rules, most Indian MFs are treated as PFICs, requiring Form 8621.
4. What if I forgot to file FBAR in prior years?
You may be eligible for Streamlined Filing Compliance Procedures to catch up without penalties.
5. Can I use TurboTax to file Indian income?
TurboTax may not handle PFIC, FBAR, or FATCA filings properly. A cross-border CPA is recommended.