FBAR, FATCA & PFIC
Three reporting regimes. Twelve asset categories. One table that tells you exactly where your Indian holdings land — and what filings they trigger.
For NRIs who have become U.S. persons — whether through a green card, citizenship, or substantial presence — the compliance landscape around Indian financial assets is rarely straightforward. FBAR, FATCA, and PFIC are separate regimes enforced by different agencies (FinCEN, IRS, and IRS again), with different thresholds, different assets in scope, and very different penalty structures. Many clients arrive assuming that filing one covers the others. It does not.
This guide maps each common Indian asset class across all three regimes so you can assess your position — or walk into your first conversation with a cross-border tax advisor knowing the right questions to ask.
The Three Regimes at a Glance
FBAR (FinCEN 114) — administered by the Financial Crimes Enforcement Network under the Bank Secrecy Act, FBAR requires U.S. persons to disclose all foreign financial accounts where the aggregate maximum balance exceeded $10,000 at any point during the year. It covers accounts — not all assets.
FATCA (Form 8938) — filed with your federal tax return under IRC §6038D, Form 8938 requires disclosure of specified foreign financial assets, including directly held foreign stocks, bonds, mutual fund interests, and financial accounts. Thresholds are higher ($50K/$75K for single filers; $100K/$150K for MFJ) but the asset scope is broader than FBAR.
PFIC (Form 8621) — a Passive Foreign Investment Company is any foreign corporation where 75% or more of gross income is passive, or 50% or more of assets produce passive income. Every Indian mutual fund folio and foreign ETF is presumptively a PFIC. There is no minimum threshold. The default §1291 excess distribution regime imposes tax at the highest ordinary rate plus §6621 compounded interest on deferred gain — making this the highest-stakes item for most India-based portfolios.
Complete Compliance Mapping by Asset Type
The table below covers every common Indian asset class held by U.S. persons, mapped across all three regimes. Conditional flags indicate that the obligation depends on specific facts — the asset type alone does not settle it.
Legend
✓ Required Obligation is confirmed by the asset type alone
⚠ Conditional Depends on specific facts — review required
✗ N/A This regime does not apply
Foreign Asset Compliance Mapping KKCA · kkca.io
| Asset / Account Type | FBAR FinCEN 114 | FATCA Form 8938 | PFIC Form 8621 |
|---|---|---|---|
| Bank & Deposit Accounts | |||
Savings / current accounts Aggregate > $10K triggers FBAR for all accounts. 8938 thresholds: $50K/$100K year-end. | ✓ Yes | ✓ Yes | ✗ No |
Fixed deposits (FDs) / Recurring deposits (RDs) Treated as deposit accounts. Interest taxable in U.S. annually regardless of Indian TDS. | ✓ Yes | ✓ Yes | ✗ No |
| Securities & Investment Accounts | |||
Foreign mutual fund folios Each folio / purchase lot = separate Form 8621. §1291 excess distribution or MTM election required. High-priority item. | ✓ Yes | ✓ Yes | ✓ Yes |
Demat accounts — foreign stocks PFIC only if entity meets passive income (>75%) or passive asset (>50%) test. Review each holding individually. | ✓ Yes | ✓ Yes | ⚠ Review |
Demat accounts — foreign ETFs Foreign ETFs are presumptively PFICs. Form 8621 required for each ETF position held. | ✓ Yes | ✓ Yes | ✓ Yes |
| Insurance Policies | |||
ULIP life insurance Underlying sub-funds are typically PFICs. Treat each sub-fund as a PFIC holding. Also review as §72 annuity vs. insurance. | ✓ Yes | ✓ Yes | ⚠ Likely |
Non-ULIP life insurance (endowment / term) Report if has cash surrender value. Pure term with no CSV: FBAR/8938 required if balance ≥ thresholds. No PFIC exposure. | ✓ Yes | ✓ Yes | ✗ No |
| Retirement & Government Schemes | |||
PPF — Public Provident Fund No India-U.S. treaty exemption. Interest and maturity proceeds fully taxable in U.S. despite Indian tax-free status. | ✓ Yes | ✓ Yes | ✗ No |
EPF — Employee Provident Fund No treaty relief for U.S. persons. Employer + employee contributions + earnings are U.S. taxable. Not treated as §401(k) equivalent. | ✓ Yes | ✓ Yes | ✗ No |
NPS — National Pension Scheme NPS equity/debt tier units may be PFICs depending on underlying fund structure. Each tier requires review. | ✓ Yes | ✓ Yes | ⚠ Tier review |
| Equity & Ownership Interests | |||
> 10% equity in a foreign entity Corp ≥10% → Form 5471. Partnership → Form 8865. PFIC if entity is passive. CFC rules if aggregate U.S. ownership > 50%. | ⚠ If fin. acct | ✓ Yes | ⚠ If passive |
Other foreign investments / retirement accounts Specify holdings. May trigger Form 3520 (foreign trusts/gifts), Form 8858 (disregarded entities), or PFIC exposure. | ⚠ Likely | ⚠ Likely | ⚠ Review |
| Signature / Authority Accounts | |||
Signature authority / POA — not beneficially owned FBAR requires reporting if signature authority over any foreign account > $10K, regardless of ownership. Form 8938 covers only owned assets. | ✓ Yes | ✗ No | ✗ No |
Five Things Every U.S. Person with Indian Assets Must Know
1. FBAR is an all-or-nothing trigger
Once the aggregate balance of all foreign accounts exceeds $10,000 at any point during the year, you must report every foreign financial account — not just the one that pushed you over. A single SBI savings account crossing ₹8.5 lakh pulls your PPF, FDs, and NRO account into FBAR automatically.
2. PFIC has no minimum threshold
Unlike FBAR and FATCA, PFIC reporting has no floor. One unit of an Indian mutual fund — regardless of value — requires a Form 8621. The default §1291 regime can result in tax at the highest marginal rate plus §6621 compounded interest going back to the year of purchase. Elections at acquisition dramatically change the outcome.
3. PPF & EPF get no treaty shield
Indian residents assume PPF and EPF are tax-free. They are — in India. The India-U.S. DTAA contains no provision equivalent to the U.S.-U.K. treaty Article 17 that would extend that exemption to U.S. persons. Interest accruing in PPF and all EPF contributions (employer + employee) plus earnings are currently U.S.-taxable as accrued.
4. ULIPs carry hidden PFIC exposure
A ULIP is not simply a life insurance policy for U.S. tax purposes. Each underlying sub-fund must be analyzed as a potential PFIC. The insurance wrapper does not neutralize the PFIC regime, and the §72 analysis (insurance vs. annuity) adds a separate layer of complexity. These are among the most frequently mishandled Indian assets.
5. Signature authority alone triggers FBAR
Many U.S. persons hold signing authority over a parent’s or business’s Indian account without any beneficial ownership. FBAR still requires reporting. This applies to POA arrangements, authorized signatories on family business accounts, and trustees of certain trusts. Form 8938, by contrast, requires ownership — so the two regimes diverge here.
6. Penalties for non-compliance are asymmetric
A non-willful FBAR failure carries penalties of up to $10,000 per violation per year. Willful violations: the greater of $100,000 or 50% of the account balance per year — potentially exceeding the account value itself. The IRS Streamlined Offshore Procedures (SDOP/SFOP) offer a penalty-mitigated path to remediation for eligible non-willful filers.
Penalty Regimes: A Quick Comparison
Penalty Comparison by Regime
| Regime | Non-willful penalty | Willful / intentional penalty | Administering agency |
|---|---|---|---|
| FBAR | Up to $10,000 per violation/year | Greater of $100,000 or 50% of balance per year | FinCEN / DOJ |
| FATCA / 8938 | $10,000 failure to file; up to $50,000 continued failure | 40% understatement penalty on undisclosed assets | IRS |
| PFIC / 8621 | Interest + tax at highest marginal rate on excess distributions | Same; extended statute of limitations | IRS |
| Form 5471 | $10,000 per form per year | Up to $50,000 per form; reduction of foreign tax credits | IRS |
What to Do Next
If you identify unreported accounts or assets in the mapping above, the path forward depends on your specific facts: how many years are open, whether the failure was willful or non-willful, and whether you are U.S.-resident or a bona fide foreign resident. The two primary remediation paths are:
Streamlined Domestic Offshore Procedures (SDOP) — for U.S.-resident non-willful filers. Requires amending three years of returns, six years of FBARs, and payment of a 5% miscellaneous offshore penalty on the highest aggregate balance.
Streamlined Foreign Offshore Procedures (SFOP) — for non-U.S.-resident non-willful filers who meet the non-residency requirements. Same filing scope; no miscellaneous offshore penalty.
For PFIC positions, the timing of elections matters significantly: a QEF election in the current year does not cure prior-year §1291 exposure. A purging election or deemed sale may be required depending on when the position was first acquired.
Disclaimer:
This article is published for informational purposes only and does not constitute legal or tax advice. The analysis above reflects general principles as of the publication date; tax law is subject to change. Individual facts and circumstances significantly affect compliance obligations. Please consult a qualified cross-border tax professional before taking any action based on this content.