As an Indian citizen or family of Indian origin living in the United States, you may be wondering what records you need to keep for your Indian financial accounts. This is especially important if you are classified as a 'US person' for tax purposes, which includes US citizens, green card holders, and those who meet the substantial presence test. If you are on a work visa such as H-1B, you might also be considered a US tax resident, meaning you are taxed on your worldwide income, including earnings from India.

Understanding FBAR Requirements

One crucial aspect of compliance for US tax residents is the Foreign Bank Account Report (FBAR). The FBAR is filed using FinCEN Form 114 and must be done electronically through the FinCEN BSA E-Filing System. It is important to note that the FBAR is filed separately from your federal tax return.

The FBAR filing requirement is triggered if you have an aggregate balance exceeding $10,000 across all your foreign financial accounts at any point during the calendar year. This means you need to consider the combined peak balance of all your accounts, not just the year-end balance or the balance of individual accounts.

Record-Keeping for FBAR

To comply with FBAR requirements, you are expected to retain detailed records for five years from the due date of the report. Keeping organized records will help you when it comes time to file your FBAR and in case of any future reviews.

  • Account Number: Ensure you have the account numbers for all your foreign financial accounts.
  • Institution Name and Address: Document the name and address of each financial institution where you hold accounts.
  • Account Type: Note the type of each account, such as savings, checking, or investment accounts.
  • Maximum Value: Keep records of the maximum value of each account during the year.

It is advisable to keep year-end statements as well as statements showing the peak balance of your accounts. This will make future filings simpler and more accurate.

What to Do Next

To ensure you are compliant with US tax laws regarding your Indian financial accounts, start by organizing your records. Gather the necessary information about your accounts, including account numbers, institution details, and maximum values. Make a habit of keeping these records updated, especially as you approach the FBAR filing deadline in April, which has an automatic extension to October. By maintaining thorough records, you can navigate your tax obligations with confidence.

Before you act on this

This article is general information for the Indian community in the United States, not tax or legal advice. Thresholds, penalty amounts and filing dates are set by the IRS and FinCEN and are adjusted over time, so confirm the current year's figures before you rely on them. Your own position depends on your visa status, residency and the specific accounts you hold — speak to a qualified cross-border tax professional before filing or making a decision.