FBAR and FATCA: The NRI Reporting Guide That Could Save You $10,000 in Penalties

You have a savings account in India with Rs 5,00,000. A fixed deposit with Rs 8,00,000. A PPF with Rs 3,00,000. A demat account with Indian stocks worth Rs 2,00,000. That is roughly $21,000 in aggregate, and the IRS expects you to report every rupee of it. Miss the filing and the penalties start at $10,000 per account, per year.

Two separate US reporting requirements cover foreign accounts and assets:

**FBAR (FinCEN 114):** Filed with the Financial Crimes Enforcement Network (FinCEN), not the IRS. Required if the aggregate value of all foreign financial accounts exceeds $10,000 at any point during the calendar year. This is not $10,000 per account. If you have five accounts with $2,500 each, the aggregate is $12,500 and you must file.

**FATCA (Form 8938):** Filed with the IRS as an attachment to your tax return. Required if foreign financial assets exceed $50,000 on the last day of the tax year or $75,000 at any point during the year (single filers). Married filing jointly thresholds are $100,000 and $150,000 respectively. These thresholds double if you live outside the US.

The same account often gets reported on both forms. That is not duplication. It is two different agencies requiring the same information under two different laws. FBAR is under the Bank Secrecy Act (31 USC 5314). FATCA is under IRC Section 6038D, enacted as part of the HIRE Act of 2010.

Most NRIs know their NRE and NRO savings accounts count. But the definition of "foreign financial account" for FBAR purposes (31 CFR 1010.350) is far broader than a bank account.

**Accounts you must report on FBAR:** - NRE savings and fixed deposits - NRO savings and fixed deposits - FCNR deposits - PPF (Public Provident Fund) account - EPF (Employee Provident Fund) balance from prior Indian employment - Demat account holding Indian stocks - Mutual fund folios (each folio is a separate account) - Life insurance policies with cash value (LIC, ICICI Prudential) - NPS (National Pension System) Tier I and Tier II accounts

**Accounts people forget to report:** - Joint accounts where you have signature authority (your spouse's NRO that you co-hold) - Accounts closed during the year (if the account existed at any point and the aggregate threshold was crossed, you report it) - Foreign currency held in a financial institution (FCNR counts even though it is denominated in USD) - Your parents' account if you have power of attorney with signature authority

**What does NOT count:** - Physical real estate in India (reported on Form 8938 only if held through a foreign entity) - Gold jewelry or physical gold held personally - Direct ownership of Indian real property (no account involved) - Cryptocurrency held on a US-based exchange

**For FATCA (Form 8938), the scope is even wider.** In addition to everything above, you also report: ownership interest in foreign entities (a partnership or company in India), foreign stock or securities not held in a financial account, foreign financial instruments, and any interest in a foreign trust or estate.

**Practical example:** You have an NRE FD (Rs 12,00,000), NRO savings (Rs 2,00,000), PPF (Rs 4,00,000), one MF folio (Rs 3,00,000), and a demat account (Rs 1,50,000). Total: Rs 22,50,000 or roughly $26,700. FBAR required. If you also hold Rs 20,00,000 in Indian property through a partnership, FATCA Form 8938 may also be required depending on your total asset threshold.

**FBAR deadline:** April 15, with an automatic extension to October 15. No form needed for the extension, it happens automatically. You file electronically through the BSA E-Filing System at FinCEN.gov. You cannot paper-file an FBAR.

**FATCA (Form 8938) deadline:** Same as your tax return. April 15 (or June 15 if you are abroad), with extensions matching your return extension. Filed as an attachment to Form 1040.

**What if you have never filed?** This is the question that keeps NRIs awake at night. You have had Indian accounts for years and never filed FBAR or FATCA. The penalties on paper are terrifying:

**FBAR penalties:** - Non-willful violation: up to $10,000 per account, per year - Willful violation: the greater of $100,000 or 50% of the account balance, per year - Criminal penalties: up to $500,000 fine and 10 years imprisonment (rare, reserved for egregious cases)

**FATCA penalties:** - $10,000 for failure to file Form 8938 - Additional $10,000 for each 30-day period of non-filing after IRS notice, up to $50,000 - 40% accuracy penalty on underpayments related to undisclosed foreign assets

**The good news: the Streamlined Filing Compliance Procedures.** If your failure to file was non-willful (you did not know about the requirement or made an honest mistake), the IRS offers the Streamlined Domestic Offshore Procedures (SDOP) or Streamlined Foreign Offshore Procedures (SFOP).

**SDOP (if you live in the US):** File 3 years of amended returns and 6 years of FBARs. Pay a 5% miscellaneous offshore penalty on the highest aggregate balance.

**SFOP (if you live abroad):** File 3 years of amended returns and 6 years of FBARs. Zero penalty.

**Important:** The streamlined procedures require a certification that your conduct was non-willful. If you knew about FBAR and chose not to file, streamlined is not available and you should consult an international tax attorney. For most NRIs who simply did not know the requirement existed, streamlined is the right path.

FBAR requires you to report the maximum value of each account during the calendar year, converted to US dollars. This creates a practical problem: you need to know the highest balance each account hit at any point during the year.

**Step 1: Determine the maximum balance.** For savings accounts, this is the highest balance shown on any statement during the year. For fixed deposits, it is the principal plus accrued interest. For mutual funds, it is the highest NAV multiplied by your units. For demat accounts, it is the highest market value during the year.

**Step 2: Convert to USD.** Use the Treasury Reporting Rate of Exchange for the last day of the calendar year. The official rates are published by the Treasury's Bureau of the Fiscal Service at fiscal.treasury.gov. For December 31, 2025, the rate was approximately 85.20 INR per USD.

**Common mistakes in valuation:**

**Mistake 1: Using the transfer date rate instead of the year-end rate.** FBAR uses the December 31 Treasury rate for conversion, regardless of when the maximum balance occurred.

**Mistake 2: Ignoring accrued interest on FDs.** A Rs 10,00,000 FD at 7% for 12 months has a maximum value of Rs 10,70,000 (principal plus interest), not Rs 10,00,000.

**Mistake 3: Reporting only current holdings in demat.** If you held Rs 5,00,000 in stocks in March, sold them in June, and held Rs 1,00,000 in December, the maximum value was Rs 5,00,000, not Rs 1,00,000.

**Mistake 4: Forgetting PPF annual interest credit.** PPF credits interest on March 31. Your maximum PPF balance is the post-interest balance.

**Pro tip for tracking:** Download your account statements quarterly. Most Indian banks provide annual certificates for NRIs. CAMS and KFintech provide consolidated mutual fund statements. Keep these records for 6 years, as that is the FBAR statute of limitations.

NRIs frequently confuse these two forms or assume filing one satisfies the other. They do not. Here is exactly how they differ:

**Filing authority:** FBAR goes to FinCEN (Treasury Department). Form 8938 goes to the IRS (attached to your 1040).

**Threshold (US residents):** FBAR triggers at $10,000 aggregate at any point. Form 8938 triggers at $50,000 on December 31 or $75,000 at any point during the year (single), or $100,000/$150,000 (married filing jointly).

**What is reported:** FBAR covers financial accounts only (bank accounts, securities accounts, mutual fund accounts). Form 8938 covers financial accounts plus financial assets not in accounts (direct stock ownership, partnership interests, foreign trusts).

**Valuation date:** FBAR reports maximum value during the year. Form 8938 reports maximum value and year-end value.

**Exchange rate:** FBAR uses Treasury year-end rate. Form 8938 uses the rate that provides a reasonable result (typically the year-end rate or the transaction date rate).

**Penalties for non-filing:** FBAR: $10,000 per account per year (non-willful). Form 8938: $10,000 per form per year, plus continuation penalties.

**Statute of limitations:** FBAR: 6 years. Form 8938: 3 years (6 years if over 25% of income is omitted).

**E-filing requirement:** FBAR must be e-filed at FinCEN.gov. Form 8938 is filed with your tax return (paper or e-file).

**Practical example for a typical NRI:** You have NRE FD ($15,000), NRO savings ($3,000), PPF ($5,000), two MF folios ($4,000 total), and a demat ($2,000). Aggregate: $29,000. You must file FBAR (over $10,000 threshold) but not Form 8938 (under $50,000 threshold). If your NRE FD was $40,000 instead, total would be $54,000, and both forms would be required.

If you have been filing FBAR and FATCA correctly, keep going. If you have not, here is the action plan:

**Step 1: Inventory every foreign account.** List every Indian bank account (NRE, NRO, FCNR), fixed deposit, PPF, EPF, NPS, demat, mutual fund folio, and insurance policy with cash value. Include accounts you closed during the year.

**Step 2: Determine your highest balances.** For each account, find the maximum balance during the calendar year. Use account statements, not memory. Convert to USD using the Treasury year-end rate (fiscal.treasury.gov).

**Step 3: Check your aggregate against thresholds.** Add up all maximum balances. Over $10,000? File FBAR. Over $50,000/$75,000? Also file Form 8938.

**Step 4: File current year correctly.** FBAR is filed separately from your tax return at FinCEN.gov/fbar. Form 8938 is attached to your 1040. Most tax software (TurboTax, H&R Block) supports Form 8938. FBAR must be filed through the BSA E-Filing portal.

**Step 5: Address prior years if needed.** If you missed FBAR or FATCA filings in prior years, evaluate the Streamlined Filing Compliance Procedures. For non-willful failures, SDOP (US residents) or SFOP (non-US residents) lets you catch up with reduced or zero penalties. File 3 years of amended returns and 6 years of FBARs.

**When to get professional help:** If your aggregate foreign accounts exceed $500,000, if you have unreported foreign income, if you have foreign trusts or entities, or if you believe your non-filing may have been willful, consult an international tax CPA or attorney before entering any compliance program. The Streamlined certification is a legal document, and getting it wrong can have serious consequences.

**Cost of professional help:** A CPA experienced with NRI tax issues typically charges $1,500-3,000 to prepare Streamlined filings. Compared to potential penalties of $10,000+ per account per year, it is worth it for complex situations.