FBAR vs FATCA for NRIs: Key Rules, Thresholds, and Penalties (2025)

(INDIA) As U.S. tax season approaches, Indian-origin taxpayers with money in Indian banks or investments face renewed scrutiny over foreign asset reporting. Two separate rules—FBAR and FATCA—carry heavy penalties for non-filing and can ripple into immigration checks for Green Card and citizenship applicants.

Tax professionals say NRIs with NRE/NRO accounts, fixed deposits, mutual funds, EPF/PPF/NPS, and even joint accounts with parents in India should confirm their reporting status now. Failure to file the right forms can draw fines and slow immigration cases.

Overview: FBAR vs. FATCA

At the center of these rules are:

• FBAR — filed with the U.S. Treasury’s Financial Crimes Enforcement Network (FinCEN).
• FATCA — reported to the IRS on Form 8938.

They serve different purposes, have different thresholds, and often both apply. Key triggers:

• FBAR trigger: foreign accounts aggregate over $10,000 at any time during the year.
• FATCA trigger: total value of broader assets passes thresholds that vary by filing status and residency (for example, $50,000 for single filers living in the U.S. at year-end).

Neither form calculates tax, but missing them can create issues with immigration officials who review “good moral character” during naturalization.

Policy Details: FBAR (FinCEN Form 114)

• Official name: FinCEN Form 114 (FBAR).
• Applies when the total of all foreign financial accounts exceeds $10,000 at any moment during the calendar year.
• Included accounts: NRE/NRO/savings accounts, fixed deposits, recurring deposits, demat/brokerage accounts, and many retirement/pension accounts such as EPF, PPF, and NPS if they meet the foreign account definition.
• Signature authority: Having signature authority alone can trigger FBAR reporting — joint accounts with a parent or spouse are often reportable.
• Deadline: April 15, with an automatic extension to October 15.
• Filing method: Electronically through FinCEN (no paper option).
• File here: Report Foreign Bank and Financial Accounts (FinCEN Form 114)

Policy Details: FATCA (Form 8938)

• Filed with the IRS as Form 8938, attached to the annual federal tax return.
• Captures a wider set of specified foreign financial assets: Indian bank accounts, mutual funds, stocks, ULIPs (insurance with cash value), EPF/PPF/NPS, partnership interests, and certain foreign trust holdings.
• Thresholds vary by residency and filing status. Examples:
  • For many NRIs living in the U.S.: $50,000 on the last day of the year or $75,000 at any time for single filers.
  • Married filing jointly: $100,000/$150,000 (last day/any time).
  • U.S. taxpayers living abroad: higher thresholds — $200,000/$300,000 (single) and $400,000/$600,000 (married filing jointly).
• Deadlines: Follows the tax return due date — typically April 15; June 15 for those abroad; October 15 with extension.
• IRS resource: About Form 8938, Statement of Specified Foreign Financial Assets

Core Distinction and Reporting Notes

• Simple rule of thumb: FBAR = foreign “accounts”, FATCA = broader “assets.”
• Many taxpayers must file both.
• Filing these forms does not add tax by itself. However:
  • Interest, dividends, capital gains, and Indian rental income must be reported on the U.S. tax return.
  • Foreign tax credits may offset Indian taxes paid.
• Confusion about FBAR vs. FATCA is common among first-time filers and new Green Card holders who retain savings and investments in India.

Penalties

• FBAR:
  • Non-willful failure: up to $10,000 per violation.
  • Willful failure: can reach 50% of the account balance per year.
  • Criminal charges possible in severe evasion cases.
• FATCA (Form 8938):
  • Initial $10,000 penalty for failing to file.
  • Additional penalties can bring total to $50,000 with continued non-compliance.
• These penalties add up quickly for NRIs with multiple accounts or long-standing omissions.

Immigration Consequences

• USCIS can review tax history for:
  • Green Card applications,
  • Naturalization (Form N-400),
  • Affidavit of Support (Form I-864) for family sponsorships.
• A pattern of missing required reports can raise questions about good moral character, potentially causing delays or denials.
• Immigration officers may request tax transcripts and compare numbers; mismatches or omissions can be problematic.

Real-life Scenarios

1. H-1B in Texas:
   • NRE account + fixed deposit; combined highest balance ~$15,000.
   • Triggers FBAR (over $10,000) but not FATCA for a single U.S. resident.
   • Missing FBAR could lead to a $10,000 non-willful penalty.
2. Green Card holder in New Jersey:
   • PPF ≈ ₹20 lakh and mutual funds ≈ ₹30 lakh (≈ $60,000 total).
   • Likely triggers FBAR and FATCA.
   • Earnings must be reported; omissions can prompt penalties and affect naturalization.
3. U.S. citizen living in India:
   • EPF ≈ ₹30 lakh (~$36,000).
   • Triggers FBAR and typically FATCA.
   • Foreign trust filings (e.g., Form 3520-A) may be required in some situations: About Form 3520-A, Annual Information Return of Foreign Trust With a U.S. Owner

What Is and Isn’t Reportable

• Generally reportable:
  • Bank and savings accounts (including joint accounts if you have signature authority)
  • Demat/brokerage accounts and mutual funds
  • ULIPs with cash value
  • Pension and retirement accounts (EPF/PPF/NPS) if they meet definitions
• Generally not directly reportable:
  • Direct ownership of Indian real estate (but rental income must be reported on the U.S. return)
• Additional filing triggers:
  • Using foreign entities or trusts to hold property can create separate filing duties
  • Cash transfers between countries require records to show source and ownership

Practical Steps to Reduce Risk

Tax preparers advise NRIs to:

1. Assemble records early:
   • Indian bank statements
   • FD certificates
   • Demat summaries
   • Pension statements
2. Identify the highest balance for each account during the year.
3. Track interest, dividends, capital gains for the U.S. return.
4. Set reminders for deadlines:
   • FBAR: April 15 (auto extension to October 15)
   • Form 8938: follows your tax return due date
5. Consult a qualified cross-border tax professional if you missed prior years — getting current quickly often limits risk.

Common Myths (Debunked)

• “I don’t earn in India, so I don’t need to file.” — False. FBAR and FATCA are asset disclosures, not just income reports.
• “India taxed it already.” — False. Indian tax does not exempt U.S. reporting; you must disclose even if a foreign tax credit offsets U.S. tax.
• “It’s a joint account with my mom, so it’s her money.” — Often false if you have signature authority.
• “Savings accounts count, but investments don’t.” — False. Many Indian financial accounts, including mutual funds, fall in scope.

Official Resources

• IRS international taxpayer guide: International Taxpayers
• FBAR filing portal and guidance: Report Foreign Bank and Financial Accounts (FinCEN Form 114)
• FATCA (Form 8938): About Form 8938, Statement of Specified Foreign Financial Assets

Key Takeaways and Deadlines

• FBAR trigger: >$10,000 in foreign accounts at any time. File FinCEN Form 114 online.
• FATCA trigger: Form 8938 thresholds vary; common trigger for U.S.-resident single filers is $50,000 (year-end) or $75,000 (any time).
• Deadlines:
  • FBAR: April 15 (automatic extension to October 15)
  • Form 8938: filed with your tax return due date
• Penalties: FBAR non-willful $10,000; willful up to 50% of the account. FATCA initial $10,000, rising with continued failure.
• Immigration: Missing forms can cause delays or denials during Green Card, citizenship, or sponsorship proceedings.

Compliance is not about paying twice — it’s about disclosure. Report interest, dividends, capital gains, and rent from India on your U.S. return. If Indian tax was paid, you may be eligible for foreign tax credits. Still, FBAR and FATCA filings are separate obligations and must be filed even when no additional U.S. tax is due.

India remains central to the financial lives of many NRIs. With accurate FBAR and FATCA filings, timely reporting of income, and well-organized records, you can protect your finances — and your immigration future.