U.S. Tax Rules for Indian Retirement Accounts: EPF, PPF, NPS

Indian diaspora workers and students in the United States 🇺🇸 are running into a hard truth this filing season: India’s tax breaks for EPF, PPF, and NPS do not carry over to U.S. tax law, and missed reports can ripple into immigration cases. According to analysis by VisaVerge.com, updated October 30, 2025, the Internal Revenue Service treats the growth in these Indian retirement accounts as taxable income for U.S. citizens, Green Card holders, and anyone who becomes a U.S. tax resident — including many F‑1 students after five years and H‑1B workers from their first day of U.S. residence. The United States taxes worldwide income and also requires detailed reporting of foreign financial accounts, so even “locked” or “tax-free in India” balances can trigger filings and tax due in the United States.

How EPF, PPF, and NPS are treated for U.S. tax

From a U.S. perspective, the three pillars of Indian retirement saving face annual U.S. tax implications:

• EPF (Employees’ Provident Fund)
  • Employer contributions and growth are treated as taxable income each year.
• PPF (Public Provident Fund)
  • Interest credited annually is taxable in the U.S., even though it is tax-free in India.
• NPS (National Pension System)
  • Earnings and growth are generally taxable each year under U.S. rules.

That means a taxpayer can owe U.S. tax even with no withdrawals, and even when India exempts the income. The IRS views the yearly growth as investment income (similar to bank interest and mutual fund gains), not as an exempt foreign pension.

Reporting rules and penalties

There are three distinct reporting obligations many U.S. tax residents must meet:

1. FBAR — FinCEN Form 114
   • File when the total of all foreign accounts tops $10,000 at any time during the year.
   • Civil penalties for missing FBARs can reach $10,000–$50,000 per year, even if no U.S. tax is due.
   • Official page: FBAR (FinCEN Form 114)
2. FATCA — Form 8938
   • Required when specified foreign financial assets exceed IRS thresholds (for example, $50,000 for single filers living in the U.S., higher limits for others, and $200,000 for qualifying taxpayers living abroad).
   • Official page: About Form 8938, Statement of Specified Foreign Financial Assets
3. U.S. tax return — Form 1040
   • Include yearly interest and growth from EPF, PPF, and NPS on the Form 1040.
   • Official page: About Form 1040, U.S. Individual Income Tax Return

Important: None of these obligations disappear because funds are in India, because the account is long-term, or because India’s rules are more generous.

Why this matters now (policy alignment and immigration links)

The policy is consistent: the U.S. taxes worldwide income and seeks a full picture of foreign assets. As of October 27, 2025, there were no targeted changes exempting Indian retirement accounts — so the same reporting rules apply.

Why it matters beyond taxes:

• Missed filings can trigger audits and tax bills.
• Immigration processes (Green Card sponsorships, naturalization) often review financial records; gaps in tax compliance can cause requests for evidence, slowdowns, or extra scrutiny.
• The stakes are practical and immediate for immigrants balancing two systems.

Real-world example

Neha, a lawful permanent resident, had EPF ₹12,00,000 and PPF ₹8,00,000, totaling over ₹20,00,000 (~$24,000). Because her foreign accounts combined exceeded $10,000, she had to file an FBAR, include the assets on FATCA filings, and report yearly EPF growth and PPF interest on Form 1040. She skipped reporting because “PPF is tax-free in India,” only to learn later the U.S. does not accept India’s exemption. The IRS imposed penalties and required amended returns. Beyond the financial cost, the extra paperwork slowed her spousal Green Card sponsorship — a clear example of how tax issues can cascade into immigration timelines.

Practical reporting steps and recordkeeping

For holders of EPF, PPF, or NPS while in the United States, follow these steps to reduce risk:

• File the FBAR when your foreign accounts combined cross $10,000 at any point during the year. Use FinCEN Form 114, filed electronically with the U.S. Treasury. See: FBAR (FinCEN Form 114).
• File FATCA disclosures when you meet IRS thresholds for specified foreign assets. See: About Form 8938, Statement of Specified Foreign Financial Assets.
• Include yearly interest and growth from EPF, PPF, and NPS on your U.S. tax return. See: About Form 1040, U.S. Individual Income Tax Return.

Recommended recordkeeping:

• Keep yearly EPF interest statements and records of employer/employee contributions.
• Retain the PPF passbook or statement showing interest posted (commonly in March each year).
• Save NPS quarterly and annual statements showing units and gains.
• Convert rupee figures to U.S. dollars using a reasonable, documented method.
• Keep proof of any Indian tax paid.

Timing and behavior tips:

• Time filings carefully — FBAR and FATCA are annual routines for many taxpayers.
• Avoid moving money out of India without checking U.S. tax effects, especially if a withdrawal could spike taxable income.
• If you have past omissions, consider filing missing forms and amending returns proactively — ideally before an immigration filing brings your tax record under scrutiny.

When do these duties begin?

Tax residence determines the start of these obligations:

• Many F‑1 students become U.S. tax residents after five years and then fall under worldwide income rules.
• H‑1B workers typically start worldwide taxation once they meet the substantial presence test or become Green Card holders.

From that point forward, EPF, PPF, and NPS balances must be treated in line with U.S. compliance rules.

Practical annual routines (examples)

• EPF: Collect statement showing employer and employee contributions and interest credited each year. Convert totals to U.S. dollars for reporting.
• PPF: Track the interest posted each March and include that figure on your return for the same tax year.
• NPS: Save quarterly and annual statements to measure taxable earnings, even when funds remain invested.

These steps do not change the accounts’ character under Indian law; they simply align them with U.S. tax rules while you live and file in the United States.

Common concerns and recommended responses

• Will reporting alone trigger problems?
  • In most cases, no. Reporting is the obligation, and meeting it is protective. Problems come from silence — not filing FBAR, FATCA, or failing to report income on the return, especially over multiple years.
• What if I’ve omitted filings in prior years?
  • Consider voluntary compliance: file missing forms and amend returns. Consulting a tax professional is advisable before making large moves (e.g., big EPF withdrawals or consolidations), as timing can affect tax liability.
• Should I expect more enforcement?
  • The IRS continues to monitor foreign accounts. FATCA and FBAR bring third-party information into the system, so steady compliance reduces risk.

Warning: Missing FBARs or FATCA forms can lead to audits, substantial penalties, and delays in Green Card or citizenship processing. Address filings proactively to reduce risk.

Bottom line

• The United States taxes worldwide income.
• FBAR is required when foreign accounts top $10,000.
• FATCA is required when assets pass IRS thresholds.
• India’s exemptions for EPF, PPF, and NPS do not carry over for U.S. tax residents.

Filing fully and on time brings financial peace and keeps immigration goals on track. VisaVerge.com reports that steady compliance — same forms, same records, same timing every year — is the cleanest path for busy families building a future in the United States while keeping roots in India.