--- title: "US tax for Americans in India | Expat Tax Abroad" url: https://expattaxabroad.com/insights/us-tax-americans-in-india/ description: "India has a treaty and no totalization agreement — and Indian mutual funds are PFICs, which on most returns turns out to be harder work than the tax itself." lang: en --- Skip to content IRS Enrolled Agent · One preparer, every return 48 country guides 48 guides (https://expattaxabroad.com/countries/) Verify at IRS.gov: https://irs.treasury.gov/rpo/rpo.jsf Facebook: https://www.facebook.com/people/Jorge-I-Rivas-ExpatTax/61572578032002/ Instagram: https://www.instagram.com/jrivas0013/ LinkedIn: https://www.linkedin.com/in/jorgeirivas1186sm X: https://x.com/jrivas0013 Filing rules · 22 September 2026 # US tax for Americans in India There is a US–India income tax treaty, so Indian income tax is creditable and double income tax is addressable. There is no totalization agreement, so US self-employment tax at 15.3% applies with no relief. On most Indian returns, though, the accounts are harder than the tax — mutual funds are PFICs, and NRE interest being exempt in India makes it no less taxable in America. Image: A treaty ticked and a totalization agreement struck through, with Indian mutual funds marked as PFICs on the US return. (https://expattaxabroad.com/features/art-india-1600.webp) Image: Jorge I. Rivas, EA (https://expattaxabroad.com/_astro/jorge-rivas-avatar.BkTc9hQv_ZqNxAY.webp) Jorge I. Rivas, EA Enrolled Agent · 7 minutes to read ## A treaty, and no totalization agreement The treaty relieves double income tax: Indian income tax, including surcharge and cess, generally forms part of the creditable tax on Form 1116, and Article 25 governs how the credit works. Indian rates reach 30% before surcharge and cess, which usually makes the credit the better route on employment income. There is no totalization agreement. For an employee that rarely matters; for a consultant invoicing from Bengaluru it means 15.3% self-employment tax on net earnings with nothing to relieve it. ## Indian mutual funds are PFICs This is the item that turns a simple Indian return into a long one. Indian mutual funds are foreign mutual funds for US purposes — passive foreign investment companies — which brings Form 8621, one for each fund, and under the default method a disposal is taxed at the highest ordinary rate for every year the holding was owned, with an interest charge on top. A single SIP running for five years across three funds is three forms and three separate calculations. Nothing about this is visible from the Indian side, where the same investment is ordinary and tax-efficient. ## PPF and EPF do not carry their treatment across Both are tax-favoured in India and neither is automatically tax-deferred to the United States. There is no provision that makes them so, which means the growth inside can be currently taxable and the account reportable — and the answer is not the same for every arrangement. ## NRE and NRO accounts, and the reporting that follows Both count towards the FBAR $10,000 aggregate and towards Form 8938. NRE interest being exempt from Indian tax makes it no less US taxable income — and because no Indian tax was paid on it, there is nothing to credit against the US tax either. That combination, exempt there and taxable here, is the reverse of what most people expect from a tax-free account. ## Property, inheritance and the family arrangement Agricultural land, inherited property or an interest in a Hindu Undivided Family raises Form 3520 and Form 8938 questions that are far cheaper to answer early than to unwind later. Say so at the start rather than when the return is being finished. ## A worked example, tax year 2025 A single American employed in Bengaluru on $135,000, with Indian income tax, surcharge and cess of $40,000 for the year. Indian figures are illustrative; the US figures are computed. | Salary | $135,000 | | --- | --- | | Indian income tax, surcharge and cess — creditable | $40,000 | | US taxable income after the standard deduction | $119,250 | | US income tax before the credit | $21,467 | | US income tax after the credit | $0 | | Excess credit carried forward | $18,533 | | US tax on NRE interest, with no Indian tax to credit | Payable | The salary side is comfortable: Indian tax is nearly double the US tax on the same income, so the credit clears it. The last row is the point of the article — NRE interest is exempt in India and taxable in America, and the salary carryforward sits in a different credit basket, so it cannot be used against it. Sources: IRC §901 and §904; IRS Form 1116 instructions; Rev. Proc. 2025-32. Scroll the table sideways | Fact | Position | | --- | --- | | US income tax treaty | Yes | | Totalization agreement | No | | Local income tax | Progressive to 30%, plus surcharge and cess | | Self-employment tax (SECA) | 15.3%, no relief | | FBAR threshold | $10,000 aggregate, any point in the year | Sources IRC §901, §904, §911, §1291–1298, §1401 and §1402; US–India income tax treaty, including Article 25 on relief from double taxation; Social Security Administration totalization agreement list; IRS Publication 54; IRS Publication 514; IRS Form 8621, Form 8938 and Form 3520 instructions; Rev. Proc. 2025-32; 31 CFR 1010.350. US figures are tax year 2025. Checked 22 September 2026. Change log 22 September 2026 First published India — full country guide →: https://expattaxabroad.com/countries/india/ Expat tax returns →: https://expattaxabroad.com/services/expat-tax-returns/ FBAR / FATCA compliance →: https://expattaxabroad.com/services/fbar-fatca-compliance/ Treaty & totalization matrix →: https://expattaxabroad.com/tools/treaty-totalization-matrix/ Streamlined catch-up filing →: https://expattaxabroad.com/services/streamlined-catch-up-filing/ Home →: https://expattaxabroad.com/ All insights →: https://expattaxabroad.com/insights/ ## Questions Americans in India ask ### Are my Indian mutual funds a problem on the US return? Usually the largest one. They are PFICs, which means Form 8621 for each fund and a default calculation that taxes a disposal at the highest ordinary rate across the holding period with interest. An election can improve it, but it has to be made in time. ### Is my NRE interest taxable in the US? Yes. Being exempt from Indian tax does not make it exempt from US tax — and because no Indian tax was paid on it, there is nothing to credit against the US liability either. ### Do I pay US self-employment tax on consulting work in India? Yes, in full. There is no US–India totalization agreement, so 15.3% SECA applies to net self-employment earnings regardless of Indian tax paid or the credit claimed for it. ### Are PPF and EPF tax-deferred for US purposes? Not automatically. Indian deferral is not US deferral, and there is no provision making either arrangement automatically tax-deferred. The growth inside can be currently taxable and the account reportable. ### I have not filed for several years while in India. What now? If the failure was non-willful — which describes most people in this position — the Streamlined Foreign Offshore Procedures waive the failure-to-file, failure-to-pay and FBAR penalties: three years of returns, six years of FBARs, and Form 14653. ## Filing from India? Fifteen minutes settles what your funds and accounts actually require, which is usually more work than the tax. Book a 15-minute call: https://expattaxabroad.com/book/ Complete return $599 Prepared and signed by an Enrolled Agent Book a call (https://expattaxabroad.com/book/) ## Structured data ```json { "@context": "https://schema.org", "@graph": [ { "@type": "Person", "@id": "https://expattaxabroad.com/#jorge", "name": "Jorge I. Rivas", "honorificSuffix": "EA", "jobTitle": "Enrolled Agent", "description": "IRS Enrolled Agent specialising exclusively in US tax for Americans living abroad. 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