How do Indian Americans handle FBAR, FATCA and the US-India tax treaty?

Why this matters for Indian American families

About 69% of the 5.1 million people in the US who identify as Asian Indian were born abroad⁵, and many keep bank accounts, deposits, mutual funds or insurance policies in India. US citizens and resident aliens are taxed on their worldwide income⁶, and the US requires separate disclosure of foreign accounts and assets. Missing these filings is one of the most common and costly mistakes for families with assets in both countries. Our post on remittances from the US to India shows how large these cross-border flows are.

What HeyAlbert data shows

FBAR: the $10,000 test

The Report of Foreign Bank and Financial Accounts (FBAR), FinCEN Form 114, is required when a US person has a financial interest in, or signature authority over, foreign financial accounts whose aggregate value exceeded $10,000 at any time during the calendar year². The test is cumulative: two accounts that together top $10,000 at any moment must both be reported¹.

• Due date: April 15, with an automatic extension to October 15; no request is needed²
• Where: filed electronically through FinCEN's BSA E-Filing System, not with the tax return²
• Penalties: civil penalties are adjusted annually for inflation; the IRS notes that, for assessments before August 2016, non-willful violations carried penalties of up to $10,000 and willful violations up to the greater of $100,000 or 50% of account balances¹

For families with NRE, NRO or FCNR deposits, joint accounts with parents in India, or demat brokerage accounts, the $10,000 threshold is easily crossed.

FATCA and Form 8938

The Foreign Account Tax Compliance Act (FATCA) added a second requirement, Form 8938, filed with the federal income tax return. Thresholds are higher and depend on filing status and where the taxpayer lives¹:

Taxpayer living in the US	Year-end value above	Or at any time above
Single or married filing separately	$50,000	$75,000
Married filing jointly	$100,000	$150,000

Form 8938 covers more than bank accounts, including some foreign financial assets that are not accounts. Some items appear on only one form: the IRS lists foreign hedge funds and private equity funds as reportable on Form 8938 but not the FBAR, while foreign real estate held directly is reportable on neither¹. That last point surprises many owners; see whether Indian Americans keep property in India.

India's side: banks report to the IRS

On July 9, 2015, the US and India signed an intergovernmental agreement to implement FATCA⁴. Under it, Indian financial institutions collect information on accounts held by US persons, which India exchanges with the US under the authority of the 1989 tax treaty⁴. In practice, this means Indian banks and fund houses ask US clients for tax documentation, and accounts that go unreported in the US may be visible to the IRS anyway.

Indian mutual funds and the PFIC problem

A frequent trap is Indian mutual funds. Under US rules, a foreign corporation is a passive foreign investment company (PFIC) if 75% or more of its gross income is passive or at least 50% of its assets produce passive income⁷. Many foreign pooled investment funds meet that test, and US shareholders of PFICs may have to file Form 8621 and face less favorable tax treatment⁷. Advisors working with Indian American clients often review Indian fund holdings for this reason. For how the community invests more broadly, see how Indian Americans invest.

The US-India tax treaty

The income tax convention between the US and India was signed in New Delhi on September 12, 1989^3,4. Like other US treaties, it sets rules on which country can tax different kinds of income and how double taxation is relieved. US taxpayers may also claim a foreign tax credit for income taxes paid abroad, subject to limits⁶. Treaty positions can be complex; the treaty and its technical explanation are published by the IRS³.

The income tax treaty does not cover estates, which creates separate questions for families with assets in both countries. We cover those in cross-border estate planning for Indian Americans. For how high-net-worth families organize this work, see Indian American family offices.

A note on this guide

This article summarizes publicly available IRS, FinCEN and Treasury guidance as of October 2026 and is not tax advice. Thresholds, forms and penalties change, and individual circumstances, such as residency status in either country, matter. Families with Indian accounts or assets should work with a professional who handles both US and Indian rules. Readers interested in the wider wealth-management picture can start with private foundations and donor-advised funds.