FATCA/FBAR (US Person Reporting)

By Manu Rao | Updated March 2026

What Is FATCA?

The Foreign Account Tax Compliance Act (FATCA) is a US federal law enacted in 2010 (as part of the HIRE Act) that requires foreign financial institutions (FFIs) worldwide to identify and report information about accounts held by US persons to the US Internal Revenue Service (IRS). FATCA also requires US taxpayers to report their foreign financial assets on Form 8938 if they exceed specified thresholds.

FATCA's reach is global. Indian banks, mutual funds, insurance companies, and custodians all comply with FATCA by identifying US account holders and reporting their details to the Indian tax authority (CBDT), which transmits the data to the IRS under the India-US Intergovernmental Agreement (IGA).

What Is FBAR?

The Report of Foreign Bank and Financial Accounts (FBAR) — officially FinCEN Form 114 — is a separate US reporting requirement under the Bank Secrecy Act. Any US person (citizen, green card holder, or tax resident) who has a financial interest in or signature authority over foreign financial accounts with an aggregate value exceeding USD 10,000 at any point during the year must file an FBAR with the Financial Crimes Enforcement Network (FinCEN).

FBAR predates FATCA by decades (it dates to 1970), but the two work together: FATCA is the institution-side reporting (the Indian bank reports to the IRS), while FBAR is the taxpayer-side reporting (the US person reports their Indian accounts to FinCEN).

Legal Framework

FATCA

• Internal Revenue Code Sections 1471-1474 — Core FATCA provisions requiring FFIs to report US accounts and imposing a 30% withholding tax on US-source payments to non-compliant FFIs
• India-US Intergovernmental Agreement (IGA) — Signed July 9, 2015. India follows the Model 1 IGA, meaning Indian financial institutions report to CBDT (not directly to the IRS), and CBDT transmits the data to the IRS. In exchange, the US shares information about Indian tax residents with accounts in the US.
• Section 285BA of the Income Tax Act, 1961 — India's domestic legal basis for FATCA reporting obligations on Indian financial institutions
• Rules 114F to 114H of the Income Tax Rules — Due diligence and reporting procedures (shared with CRS implementation)

FBAR

• 31 U.S.C. Section 5314 — Authority for the FBAR requirement
• 31 CFR Section 1010.350 — Implementing regulations defining who must file, what accounts must be reported, and thresholds
• FinCEN Form 114 — The actual report, filed electronically through the BSA E-Filing System

Who Is a "US Person" for FATCA/FBAR?

This is broader than most people realize. A US person includes:

This means a person of Indian origin who became a US citizen and now invests in an Indian company is a US person for FATCA/FBAR purposes — even if they live in India and consider themselves an NRI for Indian tax purposes.

FATCA — What Indian Financial Institutions Report

Under the India-US IGA, Indian Reporting Financial Institutions report the following about US reportable accounts:

• Name, address, and US Taxpayer Identification Number (TIN — typically SSN or ITIN) of each US account holder
• Account number
• Name and GIIN (Global Intermediary Identification Number) of the reporting institution
• Account balance or value at year-end
• Total gross amount of interest paid during the year (for depository accounts)
• Total gross amount of dividends and other income paid during the year (for custodial accounts)
• Gross proceeds from the sale or redemption of property (for custodial accounts)

Reporting is done annually by May 31 for the prior calendar year.

FBAR — What the US Person Must Report

FBAR requires reporting of every foreign financial account in which the US person has a financial interest or signature authority. For a US person invested in India, this includes:

• NRE accounts, NRO accounts, and FCNR accounts
• Current accounts of an Indian company where the US person has signature authority (even if they do not own the account)
• Indian mutual fund accounts and demat accounts
• Fixed deposits in Indian banks
• Insurance policies with cash surrender value
• Any other financial account held at a foreign (non-US) institution

The USD 10,000 threshold is for the aggregate of all foreign accounts. So if a US person has an NRE account with USD 6,000 and an NRO account with USD 5,000, the aggregate is USD 11,000 — FBAR filing is required.

FBAR Filing Details

FATCA Form 8938 — The Other US Reporting Requirement

In addition to FBAR, US persons must file IRS Form 8938 (Statement of Specified Foreign Financial Assets) with their tax return if foreign financial assets exceed:

Form 8938 overlaps with FBAR but is not identical. Key differences: Form 8938 is filed with the IRS (not FinCEN), has higher thresholds, and covers a broader range of assets (including ownership interests in foreign entities like your Indian company shares, which FBAR may not cover directly).

How FATCA/FBAR Affects US Persons Investing in India

If you are a US citizen, green card holder, or US tax resident who owns or invests in an Indian company, here is what you need to know:

Opening an Indian Bank Account

When you open an NRE or NRO account, the Indian bank will ask if you are a US person and request your US TIN (SSN/ITIN). If you are a US person, the bank reports your account to CBDT under FATCA. Some Indian banks have historically been reluctant to open accounts for US persons due to FATCA compliance burden — but major AD banks like HDFC, ICICI, SBI, and Axis now have streamlined processes.

Your Indian Company's Bank Account

If you are a controlling person (typically 25% or more ownership) or an authorized signatory on the company's Indian bank account, the account is reportable under FATCA (institution-side) and you must include it on your FBAR (taxpayer-side). This catches many first-time India investors off guard.

Equity in Your Indian Company

Your ownership interest in the Indian company (shares) is a specified foreign financial asset reportable on Form 8938 (but not on FBAR, which covers financial accounts, not equity ownership). If the value of your Indian company shares plus all other foreign financial assets exceeds the Form 8938 threshold, you must report.

Dividend and Interest Income

All Indian-source income must be reported on your US tax return (Form 1040). You can claim a Foreign Tax Credit (Form 1116) for Indian taxes withheld. The India-US DTAA and US domestic law both provide mechanisms to avoid double taxation — but you must affirmatively claim the credit.

India-US FATCA IGA — How Data Flows

Under the Model 1 IGA signed between India and the US:

1. Indian financial institutions identify US reportable accounts through due diligence
2. They report to CBDT by May 31 each year
3. CBDT transmits the data to the IRS by September
4. The IRS shares reciprocal data about Indian residents with US accounts to CBDT (though the scope of US reciprocal reporting is narrower than what India provides)

This asymmetry — India reports more to the US than the US reports to India — has been a point of negotiation, but it reflects FATCA's design as a US-centric regime.

30% FATCA Withholding

FATCA imposes a 30% withholding tax on certain US-source payments (interest, dividends, gross proceeds) made to non-compliant FFIs. Because India has an IGA and Indian financial institutions are generally compliant, this withholding typically does not apply to Indian institutions. However, if an Indian financial institution fails to comply — or if a US person fails to provide their TIN to the Indian institution — the 30% withholding risk becomes real for US-source payments flowing through that institution.

Common Mistakes

• Not realizing you are a US person. Green card holders who have lived in India for years may forget they are still US persons. Accidental Americans (born in the US but raised elsewhere) may not even know they hold US citizenship. FATCA and FBAR apply regardless.
• Filing FBAR but not Form 8938, or vice versa. These are two separate requirements with different thresholds, different filing destinations, and different penalties. You may need to file both.
• Omitting the Indian company's bank account from FBAR. If you have signature authority over the company's current account (as a director/signatory), you must report it on FBAR — even though it is a company account, not a personal one.
• Not claiming the Foreign Tax Credit. India withholds tax on dividends, interest, and capital gains. Without claiming the credit on Form 1116, you pay tax twice on the same income. The India-US DTAA provides for credit, but you must claim it.
• Assuming NRE accounts are exempt. NRE accounts are tax-exempt in India (interest is not taxed in India), but the account itself is still reportable on FBAR and Form 8938. And the interest is still taxable in the US as worldwide income.

Practical Example

Priya is a US citizen (OCI holder) living in San Francisco. She invests INR 1 crore (approximately USD 120,000) in a Private Limited Company in Bangalore through the automatic route, holding 80% equity. She is also a director and authorized signatory on the company's HDFC Bank current account.

FATCA (institution-side reporting):

• HDFC Bank identifies Priya as a US person when she opens her NRE account. Her NRE account (balance INR 25 lakh) and the company's current account (balance INR 1.5 crore, with Priya as controlling person) are reported to CBDT, which transmits to the IRS.
• If Priya holds Indian mutual funds, those are also reported.

FBAR (Priya's obligation):

• Priya files FinCEN Form 114 by October 15, reporting: (i) her NRE account — maximum value during the year: INR 30 lakh (approx. USD 36,000); (ii) the company's current account — maximum value: INR 2 crore (approx. USD 240,000), reported because she has signature authority; (iii) her Indian mutual fund account if any.
• Aggregate exceeds USD 10,000 — FBAR is required.

Form 8938 (Priya's obligation):

• Priya's foreign financial assets: NRE account (USD 36,000) + Indian company shares (USD 120,000) + any other foreign assets. Total exceeds USD 50,000 (single, living in the US) — Form 8938 is required.
• She reports the NRE account, the Indian mutual fund, and her Indian company shareholding on Form 8938.

Tax return: Priya reports all Indian income — dividends, interest on NRE (tax-free in India but taxable in the US), capital gains — on her US Form 1040. She claims a Foreign Tax Credit for any Indian taxes withheld.

FBAR vs. Form 8938 — Quick Comparison

Key Takeaways

• FATCA requires Indian financial institutions to report US person accounts to CBDT, which shares with the IRS
• FBAR requires US persons to report all foreign accounts with aggregate value over USD 10,000
• Form 8938 is a separate IRS requirement with higher thresholds — covers financial assets including equity in foreign companies
• US persons include citizens (even accidental Americans), green card holders, and substantial presence test residents
• Company bank accounts where you have signature authority must be included on FBAR
• NRE account interest is tax-free in India but taxable in the US — and the account is still reportable
• Penalties are severe — up to 50% of account balance for willful FBAR violations
• Always claim the Foreign Tax Credit on Form 1116 to avoid double taxation on Indian income

Are you a US person with investments in India? Beacon Filing coordinates with US tax advisors to ensure your FATCA, FBAR, and Form 8938 obligations are fully met.