FATCA & CRS India Compliance (2019) – IRS Reporting Requirements (Golding & Golding)

FATCA & CRS India Compliance (2019) – IRS Reporting Requirements (Golding & Golding)

FATCA & CRS India Compliance (2019) — Whether you have Fixed Deposits (FDs), Mutual Funds, Securities, PPF, EPF, Demat, a foreign business, or real estate investments — Offshore Disclosure is everywhere.

We can help!

When it comes to U.S. Tax of India, FATCA and CRS  — it can get very complicated. That is because India and the U.S. entered into a FATCA Agreement, and India is part of CRS – but the U.S. is not part of CRS.

IRS & CRS India

You may be able to breathe a (small) sigh of relief. Even though foreign banks such as ICICI, Axis, SBI, etc. may issue FATCA & CRS letters as a “single letter” — the U.S. has not agreed to comply with CRS — so there is currently no CRS Reporting requirement for U.S. Person (at least involving the IRS).

You may have to still comply with CRS, but not when you are filing your U.S. Tax Returns.

FATCA India Compliance

Therefore, if you are a dual or multinational, you may receive various CRS, FATCA and related correspondence that require your annual compliance. And, the requirements are not uniform amongst the different programs.

Other facts complicating tax issues, include:

  • FATCA Compliance for U.S Persons (U.S. is not a member of CRS)
  • CRS reporting to non-U.S. countries
  • Many Tax-Free investments in India are Taxable in the U.S. 
  • Specific India Tax rules for Indian Citizen Resident vs. Non-Residents
  • FBAR Filing requirements for Citizens and Non-Citizens
  • Mutual Fund discrepancies in U.S. and India
  • Different Capital Gain rules

FATCA (Foreign Account Tax Compliance Act)

FATCA is Foreign Account Tax Compliance Act. The U.S. has entered into FATCA agreements with more than 110 countries and 300,000 Foreign Financial Institutions.

Click Here for a detailed summary on FATCA.

CRS (Common Reporting Standard)

As provided by the OECD:


The Standard for Automatic Exchange of Financial Account Information, developed by the OECD with G20 countries, represents the international consensus on automatic exchange of financial account information for tax purposes, on a reciprocal basis.


Over 60 jurisdictions have committed to implementing the Standard and all financial centres have been called to match those commitments, as of July 2014.This publication is the first edition of the full version of the Standard for Automatic Exchange of Financial Account Information.


*The U.S. has not agreed to comply with CRS

Tax Basics – U.S. Person with Indian Investments

Typically, a “U.S. Person” (not just U.S. citizens) are subject to U.S. Tax and Reporting.

Who is a U.S. Person (Individual)?

A U.S. Person individual is usually anyone who falls into the three (3) following categories:

  • U.S. Citizen
  • U.S. Legal Permanent Resident (Green Card)
  • Most visa holders such B1/B2, H-1B, L-1, E-2, etc. (certain restrictions for F, J and other visas)

What is Worldwide Income & Reporting?

Worldwide income and reporting is just as bad as it sounds. You have to report ALL of your investments and income worldwide. It does not matter if you owned the accounts or assets before you came to the U.S.

It also doesn’t matter if you pay tax and/or are TDS in India – or if it tax-free in India. Just because it is tax-free in India does not make it tax-free in the U.S.

10  Indian Investments Subject to U.S. Tax & Reporting

1. Fixed Deposits

Even though the FD does not distribute income during the growth period, it is earning income. While you may not touch or access the money during the growth phase (or be penalized), it is still taxable and reportable in the U.S as it accrues and not just the payment at end.

2. PPF Accruals

Just as with the FDs, if your PPF is accruing income, which is not being distributed, it is still “earning income” and is still taxable and reportable in the U.S.

3. Stock Certificates/Demat

Whether or not you have actual stock certificates, or Demat, the values have to be reported. Since Demat is an “Account” and the actual stock certificates are not in an account, the reporting requirements are different.

Generally, the account is reported on the FBAR, and usually the Form 8938 “FATCA.” The certificates are reported on the 8938 but not the FBAR (since it is not in an “account.”) The thresholds for the 8938 vary extensively based on your U.S. Residence and marital status. You may have to file one form and not another form — it all depends.

* The stock earnings such as dividends and capital gains are also taxed and reported in the U.S. but Foreign Tax Credits may apply.

4. Mutual Funds

Mutual Funds are reported on the FBAR. The Mutual Fund is considered a PFIC which you may need to file on Form 8621.

The rules for PFIC are very, very complex. You may have additional reporting (unless you qualify for an exclusion/exception) and you may have additional tax (unless you made an election).

5. Bank Interest

Even if your bank interest is not in an FD, the interest is still taxable and reportable, since income is being earned on the money. This is true of your NRE account growing tax-free in India.

6. Dividends

Dividends are taxable in the U.S., even if they qualify for tax exempt treatment in India. Whether or not they are taxed now, or in the future will depend on whether the income is also PFIC income or not, and if so – if any elections have been made.

7. Capital Gains

Capital Gains are taxable in the U.S.

Certain exclusions for primary residence and other exceptions may apply to limit, reduce or avoid tax.

The Long-Term Capital Gain (LTCG) rules in the U.S. are different than India, so even though a sale may not qualify for LTCG in India, it may qualify for LTCG under U.S. investment tax rules.

8. Rental Income in India

This is a common misconception. Let’s say you earned $10,000 in rental income, but had $11,000 in expenses and taxes – no income to report, right?

Yes and No. Yes, you earned gross rent income, but no, you will have no net income. Nevertheless, the income and expenses have to be parsed out, and reported annually on a 1040 Schedule E.

9. Interest Earned on Future Property Development

This is very common in India. A client will have paid an up-front fee to a developer for a property(s) in India. During the time the property is being constructed, the investor (you) receive interest on the money you invested.

This ROI interest income must be included with your taxes.

10. Retirement Contributions

There is a Tax Treaty between the U.S. and India. Therefore, while the growth within a retirement fund may escape U.S. Tax (until distributed, unless exceptions apply), income contributions being diverted to the retirement does not usually escape U.S. tax.

10 Tax Tips (and Misconceptions) to be aware of:

1. Foreign Tax Credit

If you already paid tax on the income in India, you may be able to receive a Foreign Tax Credit in the U.S.

2. Foreign Tax Credit Refund

If the tax money you paid in India was refunded to you, it may not be worth the headache to claim the credit, since you will have to adjust your tax returns in the future.

3. Income/Gifts

If your parents are managing your accounts, and you let them keep the income (what a nice son/daughter you are), that does not default to income assignment. Rather, it generally means you report the income and you gave them a gift.

4. EPF

EPFs are through employment, and you may be able to defer tax on the growth, per the India-U.S. Tax Treaty

5. FATCA

Just because the FATCA Agreement may exempt certain foreign institutions from having to report accounts, does not mean you (as the individual investor) are exempt.

6. FBAR

If you have to file an FBAR you may also have to file a Form 8938 (or vice versa) – in other words, just because you file, does not mean you can avoid filing the other, if you meet the requirements for having to file both.

7. Foreign Earned Income Exclusion

You may be able to exclude certain earned (not investment) income if you meet either the Physical Presence Test or Bona-Fide Residence Test.

8. Transferring Account Ownership

Once you learn about reporting, the knee-jerk reaction is to consider transferring the accounts to another person. This only makes matters worse, because not only will you be out-of-compliance – but it will look bad to the IRS.

9. Calling the IRS Before Getting Into Compliance (Place Holder)

If you are considering getting into compliance, another knee-jerk reaction is to call the IRS to let them know you plan on getting into compliance. The problem is you may not even be on their radar. By calling them, you have now put yourself on their radar.

10. Be Cautions of Inexperienced Counsel

This has become an epidemic. Inexperienced attorneys tout experience they do not have, and puff their prior experience to make it seem like they have experience in this area of law, when they really do not.

Be sure to vet your attorney properly before retaining a firm.

What if You Have Unreported Income or Assets?


Unlike other areas of International Tax, you need a law firm that practices exclusively in the area of IRS Offshore Disclosure, and your attorney should be a Board Certified Tax Law Specialist.

We’re here to help you.

What is the Board Certified Tax Law Specialist Credential?

Once an Attorney earns the prestigious Board Certified Tax Law Specialist credential, it proves to the general public that the attorney is dedicated to tax law, and has real tax law practice experience as an Attorney.

Few tax attorneys have passed the tax speciality exam (regarded as one of the most difficult tax exams in the country) — and met the additional education, experience, and recommendation requirements necessary for certification.

Once a person becomes “Board Certified in Tax,” it shows they have met the following requirements:

  • Advanced tax education 
  • Extensive tax law experience
  • Attorney & Judge recommendations for certification

In California for example, there are 200,000 active Attorneys, with tens of thousands of Attorneys practicing in some area of tax — and only 350 Tax Attorneys have successfully earned the designation.

Less than 1% of Attorneys nationwide have earned the credential.

Sean M. Golding, JD, LL.M., EA (Board Certified Tax Law Specialist)

IRS Offshore Disclosure is ALL we do.

Our Managing Partner, Sean M. Golding, JD, LLM, EA  earned an LL.M. (Master’s in Tax Law) from the University of Denver and is also an Enrolled Agent (the highest credential awarded by the IRS, and authorizes him to represent clients nationwide.)

Mr. Golding and his team have successfully handled several hundred IRS Offshore/Voluntary Disclosure Procedure cases. Whether it is a simple or complex case, safely getting clients into compliance is our passion, and we take it very seriously.

He is frequently called upon to lecture and write on issues involving IRS Voluntary Disclosure.

Tax Law Specialty Firms are Best Prepared to Represent You in Specialized Tax Matters

Unless the firm has 50-100 attorneys, with a $25 million operating budget, a successful boutique tax-law firm will almost always have all of the attorneys in the firm devote the firms’s time, energy, and resources to one specific area of tax.

In other words, all the attorneys in the boutique tax firm practice the same, single area of tax law.

Some common niche areas of tax law include:

  • Tax Litigation
  • Employment Tax
  • Sales Tax
  • Offshore Voluntary Disclosure

For example, in employment tax, all tax attorneys in the firm handle employment tax related cases. In sales tax, all the tax attorneys in the firm handle sales tax. It may be “Sales Tax” in various different fields and industries — but the firm will limit the niche practice to sales tax.

The same is true for Offshore Voluntary Disclosure. If a firm handles Offshore Voluntary Disclosure, then all tax attorneys at the firm should be handling the same area of tax law.

This area of Offshore Disclosure law is constantly evolving, and becoming infinitely more complicated — including highly complex issues involving:

  • FBAR
  • FATCA
  • PFIC
  • CFC
  • International Cryptocurrency
  • J5
  • Increased Schedule B Enforcement (Paul Manafort)
  • Foreign Gifts
  • Foreign Inheritance
  • Foreign Business 
  • Foreign Trusts
  • OVDP
  • IRM
  • SDOP
  • SFOP

If a small firm has attorneys practicing 5-10 different areas of tax law (and even non-tax law related matters) – it can put your case at a severe disadvantage.

Why? Because it is impossible for these types of “general tax firms” to establish set protocols, policies and procedures sufficient to handle all the complexities and nuances for multiple different types of niche tax law areas.

At our tax specialty firm, we handle matters involving Offshore Voluntary Disclosure, and each case is led by one or more highly experienced attorneys.

This guarantees that your case gets the time and dedication it deserves.

Why Do We Care?

Because each month, like clockwork, we get calls from individuals in an utter state of panic, because the “Expert” or “Specialist” who made themselves out to be knowledgeable, has no real knowledge of Offshore Disclosure.

It turns out, the Attorney has never handled a complex Offshore Disclosure.

Oftentimes, Golding & Golding is called upon to fix these messes. Click Here to learn about some of the representative matters we have handled.

Serious Tax Matters; Serious Tax Consequences

Getting hit with an eggshell audit, reverse-eggshell audit, or IRS Special Investigation involving offshore money is serious business – it’s not like getting a traffic ticket or speeding ticket.

The ramifications of serious tax inquiries by the IRS (especially in the area of Offshore Disclosure and Compliance), can result in serious consequences such as monetary fines, penalties and even jail time.

Golding & Golding – IRS Offshore Disclosure Lawyers

We are the only attorneys worldwide that focuses exclusively in IRS Offshore Disclosure, and each and every case is led and managed by Mr. Golding and his team.

What Type of Attorney Should I Hire?

IRS Voluntary Disclosure is a specialized area of law. An IRS Voluntary Disclosure is a complex undertaking. It requires the coordination of several moving parts, including strategy development, Tax Preparation, Legal Analysis, Negotiation and more.

You should hire a Tax Attorney who has the following credentials:

  • ~20 Years of Private Practice experience representing his/her own clients
  • Experienced in Criminal and Civil Tax Litigation
  • Experienced representing clients in Eggshell and Reverse Eggshell Audits.
  • Advanced Tax Degree (LL.M.)
  • EA (Enrolled Agent) or CPA (Certified Public Accountant)
  • Preferably a Board Certified Tax Law Specialist

We Specialize in Safely Disclosing Foreign Money

We have successfully handled a diverse range of IRS Voluntary Disclosure and International Tax Investigation/Examination cases involving FBAR, FATCA, and high-stakes matters for clients around the globe (In over 65 countries!)

Whether it is a simple or complex case, safely getting clients into compliance is our passion, and we take it very seriously.

Examples of areas of tax we handle

Who Decides to Disclose Unreported Money?

What Types of Clients Do we Represent?

We represent Attorneys, CPAs, Doctors, Investors, Engineers, Business Owners, Entrepreneurs, Professors, Athletes, Actors, Entry-Level staff, Students, Former/Current IRS Agents and more.

You are not alone, and you are not the only one to find himself or herself in this situation.

Beware of Copycat Law Firms

Unlike other attorneys who call themselves specialists or experts in Voluntary Disclosure but are not “Board Certified,” handle 5-10 different areas of tax law, purchase multiple keyword specific domain names, and even practice outside of tax, we are absolutely dedicated to Offshore Voluntary Disclosure.

*Click here to learn the benefits of retaining a Board Certified Tax Law Specialist with advanced tax credentials.

IRS Penalty List

The following is a list of potential IRS penalties for unreported and undisclosed foreign accounts and assets:

Failure to File

If you do not file by the deadline, you might face a failure-to-file penalty. If you do not pay by the due date, you could face a failure-to-pay penalty. The failure-to-file penalty is generally more than the failure-to-pay penalty.

The penalty for filing late is usually 5 percent of the unpaid taxes for each month or part of a month that a return is late. This penalty will not exceed 25 percent of your unpaid taxes. If you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax.

Failure to Pay

f you do not pay your taxes by the due date, you will generally have to pay a failure-to-pay penalty of ½ of 1 percent of your unpaid taxes for each month or part of a month after the due date that the taxes are not paid. This penalty can be as much as 25 percent of your unpaid taxes. If both the failure-to-file penalty and the failure-to-pay penalty apply in any month, the 5 percent failure-to-file penalty is reduced by the failure-to-pay penalty.

However, if you file your return more than 60 days after the due date or extended due date, the minimum penalty is the smaller of $135 or 100 percent of the unpaid tax. You will not have to pay a failure-to-file or failure-to-pay penalty if you can show that you failed to file or pay on time because of reasonable cause and not because of willful neglect.

Civil Tax Fraud

If any part of any underpayment of tax required to be shown on a return is due to fraud, there shall be added to the tax an amount equal to 75 percent of the portion of the underpayment which is attributable to fraud.

A Penalty for failing to file FBARs

The civil penalty for willfully failing to file an FBAR can be as high as the greater of $100,000 or 50 percent of the total balance of the foreign financial account per violation. See 31 U.S.C. § 5321(a)(5). Non-willful violations that the IRS determines were not due to reasonable cause are subject to a $10,000 penalty per violation.

A Penalty for failing to file Form 8938

The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

A Penalty for failing to file Form 3520

The penalty for failing to file each one of these information returns, or for filing an incomplete return, is the greater of $10,000 or 35 percent of the gross reportable amount, except for returns reporting gifts, where the penalty is five percent of the gift per month, up to a maximum penalty of 25 percent of the gift.

A Penalty for failing to file Form 3520-A

The penalty for failing to file each one of these information returns or for filing an incomplete return, is the greater of $10,000 or 5 percent of the gross value of trust assets determined to be owned by the United States person.

A Penalty for failing to file Form 5471

The penalty for failing to file each one of these information returns is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return.

A Penalty for failing to file Form 5472

The penalty for failing to file each one of these information returns, or to keep certain records regarding reportable transactions, is $10,000, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency.

A Penalty for failing to file Form 926

The penalty for failing to file each one of these information returns is ten percent of the value of the property transferred, up to a maximum of $100,000 per return, with no limit if the failure to report the transfer was intentional.

A Penalty for failing to file Form 8865

Penalties include $10,000 for failure to file each return, with an additional $10,000 added for each month the failure continues beginning 90 days after the taxpayer is notified of the delinquency, up to a maximum of $50,000 per return, and ten percent of the value of any transferred property that is not reported, subject to a $100,000 limit.

Fraud penalties imposed under IRC §§ 6651(f) or 6663

Where an underpayment of tax, or a failure to file a tax return, is due to fraud, the taxpayer is liable for penalties that, although calculated differently, essentially amount to 75 percent of the unpaid tax.

A Penalty for failing to file a tax return imposed under IRC § 6651(a)(1)

Generally, taxpayers are required to file income tax returns. If a taxpayer fails to do so, a penalty of 5 percent of the balance due, plus an additional 5 percent for each month or fraction thereof during which the failure continues may be imposed. The penalty shall not exceed 25 percent.

A Penalty for failing to pay the amount of tax shown on the return under IRC § 6651(a)(2)

If a taxpayer fails to pay the amount of tax shown on the return, he or she may be liable for a penalty of .5 percent of the amount of tax shown on the return, plus an additional .5 percent for each additional month or fraction thereof that the amount remains unpaid, not exceeding 25 percent.

An Accuracy-Related Penalty on underpayments imposed under IRC § 6662

Depending upon which component of the accuracy-related penalty is applicable, a taxpayer may be liable for a 20 percent or 40 percent penalty

Possible Criminal Charges related to tax matters include tax evasion (IRC § 7201)

Filing a false return (IRC § 7206(1)) and failure to file an income tax return (IRC § 7203). Willfully failing to file an FBAR and willfully filing a false FBAR are both violations that are subject to criminal penalties under 31 U.S.C. § 5322.  Additional possible criminal charges include conspiracy to defraud the government with respect to claims (18 U.S.C. § 286) and conspiracy to commit offense or to defraud the United States (18 U.S.C. § 371).

A person convicted of tax evasion

Filing a false return subjects a person to a prison term of up to three years and a fine of up to $250,000. A person who fails to file a tax return is subject to a prison term of up to one year and a fine of up to $100,000. Failing to file an FBAR subjects a person to a prison term of up to ten years and criminal penalties of up to $500,000.  A person convicted of conspiracy to defraud the government with respect to claims is subject to a prison term of up to not more than 10 years or a fine of up to $250,000.  A person convicted of conspiracy to commit offense or to defraud the United States is subject to a prison term of not more than five years and a fine of up to $250,000.

What Should You Do?

Everyone makes mistakes. If at some point that you should have been reporting your foreign income, accounts, assets or investments the prudent and least costly (but most effective) method for getting compliance is through one of the approved IRS offshore voluntary disclosure program.

Be Careful of the IRS

With the introduction and enforcement of FATCA for both Civil and Criminal Penalties, renewed interest in the IRS issuing FBAR Penalties, crackdown on Cryptocurrency (and IRS joining J5), the termination of OVDP, and recent foreign bank settlements with the IRS…there are not many places left to hide.

4 Types of IRS Voluntary Disclosure Programs

There are typically four types of IRS Voluntary Disclosure programs, and they include:

Contact Us Today; Let us Help You.