FBAR for Indian Bank Accounts

If you are a U.S. citizen, a green card holder or another U.S. tax resident with a bank account in India, you may have to file an FBAR, formally FinCEN Form 114, even when the account earns little interest. The FBAR is a report of the accounts themselves, not of the income. It goes to the Treasury Department's Financial Crimes Enforcement Network (FinCEN), not to the IRS with your tax return, though the IRS enforces it. This page explains how it applies to Indian accounts.

Who has to file

A "U.S. person" includes citizens, resident aliens (people who pass the green card test or substantial presence test), and U.S. entities. An H-1B or L-1 worker who becomes a U.S. tax resident is covered. The $10,000 test looks at the combined value of all your foreign accounts, so several small Indian accounts can add up to more than the limit. Many preparers add each account's highest balance of the year to stay on the safe side.

Which Indian accounts count

Financial interest and signature authority

You have a financial interest if you are the owner of record or hold legal title, even if the money belongs to someone else. You also have one through an entity you own more than 50 percent of. You have signature authority if you can direct the bank to move the money by communicating with it. Each joint owner reports the full value of the account, not a share.

Spouses have a shortcut. If every account one spouse must report is jointly owned with the other, one spouse can file for both if the other signs Form 114a, which stays in your records and is not sent in. Otherwise each spouse files and reports the entire joint balance.

What to report

For each account you need the bank's name and address, the account number, the type of account and the maximum value during the year. Take the maximum from your statements in the account's currency, then convert it to dollars using the Treasury's year-end exchange rate. Keep records for five years. The FBAR reports values, not interest. Interest and other income still go on your Form 1040 (see NRE, NRO and FCNR accounts).

FBAR versus Form 8938

Both forms can apply to the same Indian account, and filing one does not replace the other. The thresholds, due dates and filing places differ. The FBAR has a $10,000 aggregate test; Form 8938 uses higher thresholds that depend on your filing status and where you live.

If you missed an FBAR

File as soon as you can, because late filing generally limits exposure better than waiting. Civil and criminal penalties can apply, and what applies depends on the facts, including whether the failure was willful (see FBAR penalties and reasonable cause relief). The IRS also runs streamlined filing compliance procedures for people who certify that earlier failures were not willful. They are not available once the IRS has opened an examination, and a person worried about willfulness should speak to a professional first.

How we can help

We determine whether you must file, collect the account details, prepare the FBAR and coordinate the figures with your Form 8938 and Form 1040. If you have unfiled years, we can help you review the options. See our international tax services.

Frequently asked questions

General information only, not tax, legal or accounting advice for your situation. Rules, limits and deadlines change; confirm the current rules with the official source or a qualified professional before you act. Reading this page does not create a professional relationship with CPA Tax Payroll and Accounting Corp.