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Expat Foreign Banking & Pension Tax Guide

Navigating foreign accounts (NRE/NRO, ISA, TFSA, RRSP), FBAR/FATCA reporting, and IRS Form 8621 PFIC tax rules.

Select Country to Check Account Taxability

Account names such as ISA, TFSA, NRE, NRO, SIPP, RRSP, Riester, or Rürup do not by themselves determine U.S. tax treatment. The legal structure, underlying investments, taxpayer status, treaty provisions, elections, and applicable reporting thresholds must also be considered.

🇮🇳 Indian NRE / NRO Accounts & Mutual Funds

Indian bank accounts and mutual funds face specific tax and disclosure rules under the IRS and the U.S.-India Double Taxation Avoidance Agreement.

Account TypeU.S. Tax StatusTreaty StatusSpecific Tax Details
NRE Fixed Deposit (FD)Taxable by IRSTax-Free in India onlyNRE account interest is exempt from Indian income tax under Section 10(4)(ii), subject to the Indian-law conditions. A U.S. citizen or resident generally remains taxable by the U.S. on the interest. U.S. income reporting is required, while FBAR and Form 8938 reporting depends on the applicable foreign-account and foreign-asset thresholds and other rules.
NRO Account (Non-Resident Ordinary)Taxable by both US & IndiaArticle 11 Interest / Article 25 ReliefNRO interest is taxable in India under Indian domestic law, with applicable withholding subject to the current domestic rules and any treaty relief for an eligible U.S. resident. Article 11 of the U.S.-India treaty generally limits Indian source-country tax on interest to 10% for qualifying bank/financial-institution loan interest and 15% for other interest. U.S. taxpayers may generally consider a foreign tax credit under the applicable U.S. rules, including Form 1116, subject to the credit limitations.
Indian Mutual Funds / SIPsTaxable & PFIC WarningNo Treaty ExemptionMany foreign mutual funds and similar pooled investment vehicles can be PFICs under the U.S. PFIC rules. The classification depends on the fund/entity satisfying the PFIC statutory tests; it should not be stated that every Indian mutual fund is automatically a PFIC without applying those tests. Form 8621 may be required when the applicable PFIC reporting rules are triggered.
Tax vs. reporting are separate questions: Whether an account or investment is taxable, whether it qualifies for treaty relief, and whether it must be reported on FBAR, Form 8938, Form 8621, Form 3520/3520-A, or another form are separate determinations. One form does not automatically replace another, and meeting one reporting threshold does not automatically establish another.
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FBAR vs. FATCA Limits

FBAR (FinCEN 114): Generally required when the aggregate maximum value of qualifying foreign financial accounts exceeds $10,000 at any time during the calendar year, subject to the applicable exceptions and definition of a reportable foreign financial account.

FATCA (Form 8938): Thresholds depend on filing status and residence. For an unmarried taxpayer living in the U.S., the threshold is more than $50,000 on the last day of the year or more than $75,000 at any time. For married taxpayers filing jointly and living in the U.S., the thresholds are more than $100,000 and $150,000 respectively. Taxpayers living abroad can have substantially higher thresholds.

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Frequently Asked Questions (FAQ)

A PFIC is a foreign corporation that satisfies the statutory PFIC income or asset tests under IRC section 1297. Many foreign mutual funds and similar pooled investments can be PFICs, but not every foreign investment automatically qualifies. When Form 8621 is required, the applicable PFIC regime can involve excess-distribution rules and an interest charge; QEF or mark-to-market elections may change the treatment when available.

FBAR civil penalties are adjusted for inflation. For a non-willful violation, the maximum is the inflation-adjusted statutory amount, subject to the reasonable-cause rules. For a willful violation, the maximum is generally the greater of the inflation-adjusted statutory amount or 50% of the balance in the account at the time of the violation. After Bittner, a non-willful failure to file one required FBAR is generally treated as one violation rather than one penalty for every unreported account.

Yes, generally for U.S. citizens and resident aliens. India exempts qualifying NRE-account interest under Section 10(4)(ii), but the U.S. generally taxes its citizens and residents on worldwide income. The interest must be included under the applicable U.S. income-tax rules; Schedule B may be required depending on the taxpayer's circumstances, while FBAR and Form 8938 have separate reporting thresholds.

A UK ISA does not receive a general U.S. income-tax exemption merely because it is tax-free under UK law. Income and gains inside the ISA can therefore be taxable under U.S. domestic law. The exact reporting depends on the assets held, and foreign pooled investments may create PFIC/Form 8621 requirements.

No. Qualifying Canadian RRSPs and RRIFs receive special U.S. tax treatment under Article XVIII and Rev. Proc. 2014-55, including deferral of U.S. taxation on undistributed income until distribution. TFSAs do not receive the same treaty deferral. TFSA income can therefore be taxable under U.S. domestic law, and additional reporting can depend on the TFSA's legal structure and the assets held.

FBAR and Form 8938 are separate reporting regimes. FBAR generally applies when the aggregate maximum value of qualifying foreign financial accounts exceeds $10,000 at any time during the calendar year and is filed electronically with FinCEN. Form 8938 is attached to the federal income-tax return and has different thresholds depending on filing status and whether the taxpayer lives in the United States or abroad. For an unmarried taxpayer living in the U.S., the threshold is more than $50,000 on the last day of the year or more than $75,000 at any time; taxpayers living abroad can have substantially higher thresholds.
Official IRS & Treasury References

• FinCEN Report of Foreign Bank and Financial Accounts (FBAR): fincen.gov/fbar
• IRS Form 8621 (PFIC Information Return): irs.gov/form8621
• IRS Form 8938: irs.gov/form8938
• IRS Form 8938 Threshold Guidance: IRS FATCA reporting thresholds