PFIC Calculator for Indian Mutual Funds

Yes. US tax practice treats an Indian mutual fund as a foreign corporation, and almost all of its income and assets are passive, so every Indian fund, equity, debt, hybrid or index, is a passive foreign investment company (PFIC) for a US taxpayer. That includes citizens, green card holders and residents under the substantial presence test, which covers most H-1B workers.

Unless you made an election, section 1291 applies. Your dollar gain on each purchase is spread evenly over every day you held it. The part that falls in the year of sale is ordinary income at your normal rate. Each earlier year's part is taxed at the highest rate for that year, 37% since 2018, and an interest charge is added as if that tax had been paid late, at the IRS underpayment rate compounded daily from that year's due date.

Three things stack up. There is no 15% or 20% long-term capital gains rate, most of the gain is taxed at 37% whatever your bracket, and the interest charge grows the longer you held. A fund held for five years can lose 40% or more of its dollar gain to US tax, against 15% for a US fund.

Dollars. The cost of each purchase is converted at the exchange rate on the day you bought, and the sale at the rate on the day you sold. A falling rupee shrinks the dollar gain: a fund up 60% in rupees while the rupee went from 73 to 88 to the dollar is up only about 33% in dollars. This calculator uses the Federal Reserve's daily rate; any consistent, reasonable source is generally accepted.

Section 1291 applies only to gains. Each purchase is worked out on its own, and the Form 8621 instructions say a loss does not reduce the gain subject to section 1291, so a losing purchase does not offset a winning one. The loss itself is generally a capital loss under the normal rules, which you report on Form 8949.

The holding period still starts on the day you bought; there is no fresh start when you arrive. But the IRS's 1992 proposed regulations say a fund is not a PFIC for you on the days before you became a US person. Those days' share of the gain is ordinary income in the year of sale, with no 37% tax and no interest, and the year you arrived splits by day. Those regulations were never finalized, and the law read strictly counts every day. Enter the date you became a US person to see both.

A switch from one scheme or plan to another, including regular to direct, is a sale and a new purchase, so section 1291 applies to any gain. Gifting units also counts as a disposition. The 1992 proposed regulations would also treat ceasing to be a US person, for example moving back to India, as selling on your last day as a US person.

You file one Form 8621 for each fund in any year you sell units at a gain or receive an excess distribution, whatever the amount. In other years, a fund with no election can be left off if all your PFICs together are worth $25,000 or less on 31 December ($50,000 on a joint return). Missing a required Form 8621 keeps your whole return open to IRS assessment until it is filed. The funds still count toward FBAR and Form 8938.

Indian fund houses do not issue the PFIC annual information statement a qualified electing fund (QEF) election needs, so QEF is effectively unavailable. Mark-to-market is generally considered available for open-ended schemes, which are redeemable at a published net asset value, though no ruling confirms it. You then pay ordinary income tax each year on the rise in value, with no interest charge, and can deduct a fall up to earlier inclusions. Elected after the first year, the gain to date still goes through section 1291 that year. This calculator does not compute it.

Not the PFIC tax and interest. Indian tax on a redemption gain cannot reduce the deferred tax for earlier years; that relief applies only to tax on distributions. It can be claimed as a foreign tax credit on Form 1116 in the year of sale, but the gain is usually US-source, so the credit is often limited unless the India-US treaty's resourcing rule is used. This calculator shows the US tax before any credit.

No. The PDF is opened and read in your browser, and your purchases never leave your device. Use the detailed CAS from CAMS or KFintech, which lists each transaction; the summary CAS has balances only.