PS: This information applies to everyone considered a U.S. Person, not just those of Indian descent.
*While we are using India as example here, these rules are applicable to US persons of all other countries
Are you an Indian citizen living in the U.S. as a green card holder, citizen, or even on a temporary visa like an H1B or L1? If so, the U.S. government considers you a U.S. Person for tax purposes. This means you have to report your worldwide income **and** your financial assets held anywhere in the world.
A lot of people aren’t aware of a very important yearly reporting requirement called the Report of Foreign Bank and Financial Accounts (FBAR). You file it online using FinCEN Form 114. Ignoring this can lead to serious money penalties!
The $10,000 Rule That Triggers the FBAR
The FBAR is triggered when the total value of all your financial accounts outside the U.S. goes over $10,000 at any point during the year.
Keep in mind that the $10,000 limit isn’t per account. It’s the combined highest values of everything you hold in other countries. If the total of your accounts in India (or anywhere outside the U.S.) exceeds $10,000 even for one day, you have to report *all* of your foreign accounts on the FBAR.
What Counts as a Foreign Financial Account?
A Foreign Financial Account covers many common types of holdings. Here are some examples in India:
| Account Type | Example (India) | FBAR Disclosure Required? |
| Bank Accounts | Savings, Checking, NRE, NRO, FCNR, Recurring Deposits | ✅ Yes |
| Investment Accounts | Demat/Brokerage accounts (holding stocks/securities) | ✅ Yes |
| Mutual Funds | All Indian Mutual Fund units (including SIPs) | ✅ Yes |
| Fixed Deposits (FDs) | All term deposits (FDs/RDs) | ✅ Yes |
| Insurance | Life insurance or annuity contract with a cash surrender value (ULIPs, Whole Life) | ✅ Yes |
| Retirement Schemes | Certain foreign retirement/pension accounts | ✅ Yes |
How and When to File?
The FBAR (FinCEN Form 114) isn’t filed with your regular tax return (IRS Form 1040). It’s filed online with the Financial Crimes Enforcement Network (FinCEN), which is part of the U.S. Treasury Department.
- Due Date: The FBAR is due April 15th of the year after the year you’re reporting.
- Automatic Extension: FinCEN provides an automatic extension to October 15th each year. You don’t need to request it.
- Currency Conversion: You must convert the value of your accounts to U.S. dollars. Use the exchange rate that the U.S. Treasury Bureau of the Fiscal Service publishes for December 31st of the year you’re reporting.
Penalties for Not Filing
The penalties for not filing are a good reason to stay on top of this:
- Non-Willful Violation: If you didn’t file because you didn’t know about the requirement (a non-willful mistake), the penalty can be up to $10,000 per violation. This amount is adjusted each year for inflation. Remember, this penalty can apply to both spouses if they both have accounts that should have been reported.
- Willful Violation: If FinCEN determines that you intentionally didn’t file (meaning you knew about the requirement and ignored it), the penalties are much higher. You could be fined the greater of $100,000 or 50% of the account balance at the time of the violation, and you could face criminal charges, including jail time.
FBAR FAQs
1. Does the FBAR replace my tax return?
No. The FBAR is a separate report filed with FinCEN, not the IRS. You still need to file your federal and state tax returns (Form 1040). You also need to report any income (interest, dividends, capital gains) from your foreign accounts on your Form 1040, Schedule B.
2. What if I have a joint account with my spouse?
If you only have joint accounts with your spouse, and neither of you has any individual foreign accounts, you can file a single FBAR. The person filing needs to keep Form 114a (Record of Authorization).
If either of you has an account held individually, you both need to file separate FBARs, and each of you must report the total value of the joint accounts.
3. What if an account is in my child’s name?
Generally, the child is responsible for filing their own FBAR. If the child is a minor and can’t file, the parent or guardian must file for them. These rules apply to the child if they’re a U.S. Person and the total value of their foreign accounts exceeds $10,000.
4. Do I have to pay tax on the accounts I report?
Filing the FBAR just means you’re telling the government about the accounts. But whether you owe tax depends on the income that account generated. Interest, dividends, and capital gains from accounts in India (or elsewhere outside the U.S.) are usually taxable in the U.S. (but you might be able to claim foreign tax credits to prevent being taxed twice). Filing the FBAR itself doesn’t create a tax bill.
5. I didn’t file in previous years, what should I do?
The IRS has programs that can help, like the Delinquent FBAR Submission Procedures and the Streamlined Filing Compliance Procedures. These are for people who didn’t file because they didn’t know they had to. Don’t just file late without following the correct procedure, as this could lead to bigger problems. Talk to a tax professional who knows about FBAR and international compliance, and consider involving a tax attorney.
6. Do I need to report my foreign retirement accounts?
It depends.
- Tax-Qualified Retirement Accounts (Similar to U.S. Plans): Some retirement or pension plans might be exempt. This often applies if the plan is listed as exempt in the FBAR instructions or if it’s a trust described in specific sections of the tax code.
- India-Specific Accounts: Indian accounts like the Public Provident Fund (PPF) or Employees’ Provident Fund (EPF) usually need to be reported on the FBAR. They’re generally not considered tax-qualified U.S. retirement plans.
Because it can be complex, it’s best to assume that all foreign retirement accounts need to be reported unless a tax professional confirms that a specific exemption applies.
7. What if I only have Signature Authority over an account?
Yes, you still have to file.
The FBAR applies if you’re a U.S. person who has a financial interest in an account *or* signature authority over it.
* Signature Authority means you can control the account simply by contacting the bank.
* If you only have signature authority and no financial interest, you still have to file the FBAR. But you don’t have to provide detailed info (like the maximum value) for accounts you don’t own, unless you have signature authority over 25 or more accounts.
8. How do I calculate the Maximum Account Value during the year?**
You have to find the highest balance reached at any point during the year.
- Where to Find the Data: You can use your account statements (monthly, quarterly, etc.) if they show the maximum value. You don’t need to check the account every day.
- Currency Conversion: Once you’ve found the highest value in the local currency, convert it to U.S. dollars using the official exchange rate published by the U.S. Treasury Bureau of the Fiscal Service for December 31st of the year you’re reporting.
- Adjustments: If you move money from one bank to another during the year, both accounts will temporarily show a high balance. You must report the maximum value of each bank, even if the total amount looks higher than your actual net worth. The FBAR is a way of showing the highest activity in each account.
9. What’s the difference between FinCEN Form 114 (FBAR) and IRS Form 8938 (FATCA)?
These forms have different reporting requirements.
| Feature | FinCEN Form 114 (FBAR) | IRS Form 8938 (FATCA) |
| Official Name | Report of Foreign Bank and Financial Accounts | Statement of Specified Foreign Financial Assets |
| Where to File | Electronically with FinCEN (U.S. Treasury) | Attached to your IRS Form 1040 tax return |
| Threshold (Lowest) | $10,000 aggregate maximum value at any time | Varies significantly based on filing status and residence. Often $50k–$100k on the last day of the year. |
| Assets Reported | Financial accounts (Banks, Brokerage, Mutual Funds, Life Insurance cash value) | Financial accounts PLUS other specified foreign non-account assets (e.g., foreign stocks not held in a financial account) |
| Who Files | U.S. Person (includes entities, citizens, residents) | Specified Individuals (citizens, resident aliens) |
10. Can I get a penalty waiver for filing late?
Yes, you might be able to if you can show Reasonable Cause.
The IRS has programs like the Delinquent FBAR Submission Procedures (DFSP) that often result in no penalty if:
1. You didn’t know about the filing requirement.
2. You’ve already reported and paid all U.S. tax on the income from the foreign accounts.
3. The IRS hasn’t contacted you about the issue yet.
You must follow the correct procedure in order to qualify for a penalty waiver.
Still Have Questions?
If you need help with FBAR and/or US tax returns, you can get in touch with a qualified tax professional.
Disclaimer: while we aim to spark your interest and keep things entertaining, please treat everything shared here as food for thought rather than a rulebook for life. Since we don’t have a crystal ball and your situation is as unique as a fingerprint, we cannot guarantee accuracy or specific results, nor should you rely on this as professional advice. Please take these insights with a grain of salt, do your own homework, and always consult a qualified expert before making any big moves—because what works for one person might not work for all!
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