U.S. Tax Treatment of Indian Public Provident Fund (PPF)
U.S Taxation of Indian Public Provident Fund (PPF): A Public Provident Fund in India is a common investment vehicle. It grows tax free for 15-years, and then the investment pays out. For example, if your money is invested in an Indian PPF with a 15 year term, then the money cannot be touched by the investor during that time-period.
The investment grows tax free in India, until it is withdrawn, but the U.S. tax rules and IRS tax treatment is different.
If a U.S. person owns a PPF, they will have a U.S. tax and reporting requirement.
What is an India Public Provident Fund
Technically, the India Public Provident Fund or PPF is not a pension plan — even if it oftentimes used for retirement purposes.
As provided by ICICI:
“Public Provident Fund (PPF) scheme is a popular long term investment option backed by Government of India which offers safety with attractive interest rate and returns that are fully exempted from Tax. Investors can get the facilities such as loan, withdrawal and extension of account.”
Thus, the United States does not (usually) recognize a foreign country, tax-free investment tool as tax-free.
Some foreign investments such as Canadian registered retirement accounts (RRSP) may receive tax-deferred growth treatment, but overall it is rare.
FBAR PPF Reporting
The Public Provident Fund (PPF) is reportable on the FBAR. That is because the FBAR is used to report Foreign Bank and Financial Accounts. The PPF is a foreign account that is housed at a foreign institution, and therefore it is reportable on the FBAR.
The FBAR is filed separately from the tax return. It is reported electronically and directly to FinCEN (Financial Crimes Enforcement Network).
The failure to file may result in FBAR Penalties.
FATCA Form 8938 PPF Reporting
A PPF is also reportable on Form 8938. FATCA is the Foreign Account Tax Compliance Act. It requires the reporting of certain foreign accounts and assets directly to the IRS on Form 8938.
If the form is not filed, it may result in Form 8938 Penalties.
What Can You Do If You are Out of Compliance?
Presuming the money was from legal sources, your best options are either the Traditional IRS Voluntary Disclosure Program, or one of the Streamlined Offshore Disclosure Programs.
Golding & Golding: About Our International Tax Law Firm
Golding & Golding specializes exclusively in international tax, and specifically IRS offshore disclosure.
We are the “go-to” firm for other Attorneys, CPAs, Enrolled Agents, Accountants, and Financial Professionals across the globe. Our attorneys have worked with thousands of clients on offshore disclosure matters, including FATCA & FBAR.
Each case is led by a Board-Certified Tax Law Specialist with 20 years of experience, and the entire matter (tax and legal) is handled by our team, in-house.
*Please beware of copycat tax and law firms misleading the public about their credentials and experience.
Less than 1% of Tax Attorneys Nationwide Are Certified Specialists
Sean M. Golding is one of less than 350 Attorneys (out of more than 200,000 practicing California Attorneys) to earn the Certified Tax Law Specialist credential. The credential is awarded to less than 1% of Attorneys.
Recent Golding & Golding Case Highlights
- We represented a client in an 8-figure disclosure that spanned 7 countries.
- We represented a high-net-worth client to facilitate a complex expatriation with offshore disclosure.
- We represented an overseas family with bringing multiple businesses & personal investments into U.S. tax and offshore compliance.
- We took over a case from a small firm that unsuccessfully submitted multiple clients to IRS Offshore Disclosure.
- We successfully completed several recent disclosures for clients with assets ranging from $50,000 – $7,000,000+.
How to Hire Experienced Form 8938 Counsel?
Generally, experienced attorneys in this field will have the following credentials/experience:
- 20-years experience as a practicing attorney
- Extensive litigation, high-stakes audit and trial experience
- Board Certified Tax Law Specialist credential
- Master’s of Tax Law (LL.M.)
- Dually Licensed as an EA (Enrolled Agent) or CPA
Interested in Learning More about Golding & Golding?
No matter where in the world you reside, our international tax team can get you IRS offshore compliant.
Golding & Golding specializes in FBAR and FATCA. Contact our firm today for assistance with getting compliant.