US-person investing in India
Investing in India as a US person:
every route and the compliance that comes with it
You want India exposure, you're a US citizen or green-card holder, and nobody tells you that US tax law punishes most Indian investment vehicles. So here's the full map — what you can invest in, and what the IRS makes you file for each.
This is the structural picture. Anything involving real money needs a cross-border CPA who has actually filed Form 8621 before. The penalties for getting compliance wrong are worse than the tax itself.
You generally remain subject to US worldwide taxation until the green card is formally abandoned or terminated under US tax rules. Everything below still applies to you even after you've moved back.
The short version
For passive, broad exposure: US-listed India ETFs (INDA, EPI, PIN, SMIN, INDY) win on simplicity, cost, and compliance. No PFIC, no India account, no Form 8621. Done.
For active conviction: direct Indian stocks or a vetted GIFT City PMS where you own the securities directly — never Indian mutual funds.
If you already hold Indian mutual funds or inherited some: talk to a cross-border CPA about a cleanup strategy. The PFIC taint doesn't clear itself.
The one concept that changes everything
PFIC — Passive Foreign Investment Company
US tax law treats most pooled foreign investments as PFICs, and the taxation is brutal: punitive tax rates on gains, interest charges on top, and a separate Form 8621 filing per fund, per year. This isn't an India problem specifically — it's how the US treats almost all non-US pooled funds. India just happens to be where a lot of us hold money.
| Counts as a PFIC (avoid) | NOT a PFIC (safe) |
|---|---|
| Indian mutual funds (all of them) | Individual Indian stocks held directly |
| Indian ETFs listed in India | US-listed India ETFs (INDA, EPI, PIN, SMIN, INDY) |
| ULIPs & most insurance-linked plans | PMS / SMAs where you own the underlying securities (incl. GIFT City) |
| Most GIFT City mutual funds & pooled funds | ESOPs & RSUs from an Indian employer (operating-company equity) |
On AIFs: many Indian AIFs meet the PFIC tests, but it's not automatic — the determination is fact-specific. Confirm with a US tax advisor before assuming either way.
It helps with foreign tax credits and some withholding, but it does not override the PFIC rules. People assume the treaty smooths all of this out. It doesn't. This is why US-based NRIs who know the rules get India exposure through US-listed ETFs or direct stocks — not Indian mutual funds.
Ranked by US-person friendliness
The investment routes
- US-listed India ETFs — cleanest. INDA, EPI, PIN, SMIN, INDY in your existing US brokerage. No PFIC, no India account, no extra forms. Still taxable (dividends + capital gains under normal US rules), but the right default for most people.
- Direct Indian equity — clean but more work. Individual stocks via an NRE/NRO-linked PIS or non-PIS account. Not PFICs because you own the shares. File FBAR + FATCA for the account, report dividends and gains, claim foreign tax credit for Indian tax paid.
- GIFT City PMS — clean if structured right. Separately managed accounts where you own individual securities (not fund units) avoid PFIC. Dollar-denominated, individual-investor floor around $75,000. Pooled GIFT City funds are still PFICs — get the manager to confirm PFIC status in writing before you wire anything.
- NRE / NRO / FCNR deposits — clean, just report them. NRE (foreign income, tax-free in India), FCNR (foreign-currency FDs, tax-free in India), NRO (India-source income, taxable + 30% TDS). All reportable to the US. NRE interest tax-free in India is still taxable on your US return.
- Indian real estate — reportable, depreciation differs. Rental income on your US return with US depreciation rules (often faster schedule). Capital gains taxable in both countries with a foreign tax credit. Repatriation via NRO, $1M/year cap.
- Startup / angel investing — case by case. Direct equity in a startup isn't a PFIC (operating company). Fund units via an AIF may be, depending on structure. Gets fact-specific fast.
All PFICs. Form 8621 per fund per year, punitive treatment — the paperwork alone usually wipes out the benefit. Most cross-border CPAs tell US clients to stay away entirely. The lived experience is consistent: expensive prep fees every year just to report mediocre after-tax returns.
Comes up constantly
The legacy mutual fund problem — and how you get out
Many US citizens who lived in India before moving abroad still hold Indian mutual funds bought years ago, before they understood any of this. The PFIC rules generally apply regardless of when you acquired the investment. Same goes for funds you inherit.
The painful part: the PFIC taint follows the holding. Selling doesn't automatically wipe it clean — there's a "once a PFIC, always a PFIC" principle that can keep applying even after you've exited, unless you make a specific purging election. The ways out (QEF election, mark-to-market election, or a purge) all exist but are complex and usually need a specialist.
And don't assume old purchases are grandfathered — they're not. Build a deliberate cleanup strategy with a cross-border CPA, sooner not later.
Sovereign Gold Bonds — no longer an option
The SGB scheme was discontinued in Budget 2025 — no new tranches. NRIs were never allowed to buy them under FEMA anyway (if you bought as a resident and later became NRI, you can hold to maturity). For gold exposure now, US-listed gold ETFs are the clean route for a US person.
What you actually file
The compliance stack
| Form | When it applies |
|---|---|
| FBAR (FinCEN 114) | Foreign accounts combined cross $10,000 at any point in the year — even for a day, even with zero income. NRE, NRO, FCNR, Indian brokerage all count. Filed separately from your tax return. |
| FATCA (Form 8938) | Filed with your 1040 if specified foreign assets exceed thresholds — $50k last day / $75k any point for US residents, doubled for MFJ. Higher if you live abroad. |
| Form 8621 | One per PFIC per year. The form you're trying to avoid by not holding Indian mutual funds. |
| Form 1116 | Foreign tax credit — so you're not taxed twice on income India already taxed. |
| Form 3520 | Gift or inheritance above $100,000 from a non-US person in a year. Common when parents in India transfer money/property. Informational, no tax due, but the non-filing penalty is severe. |
| Schedule B | Flag foreign accounts and report foreign interest and dividends. |
Reporting approaches vary; no clean settled answer. PPF interest is tax-free in India but generally taxable in the US, foreign-trust treatment is debated, and some CPAs file Forms 3520 and 3520-A. NPS has its own quirks. Get specialized advice rather than copying what someone on a forum did.
US tax law can recognize gains from currency movements on certain foreign-currency transactions — even when you made no economic gain in rupee terms. If you hold large INR balances and move them around, this can surface taxable events that catch people off guard. Raise it with your CPA if your balances are significant.
Common questions
US-person investing FAQ
What is a PFIC and why does it matter?
Are US-listed India ETFs PFICs?
Does the India-US tax treaty override PFIC rules?
What does a US person have to file for Indian investments?
I already hold Indian mutual funds. How do I get out?
Do green-card holders living in India still owe US tax?
Other corridors
Investing guides for other NRIs
Not a CPA · The map, not the advice · No paid recommendations · Methodology →