How Indian Banks Report US Account Holders to the IRS
Many US persons with Indian accounts assume the information stays in India. It does not. Under the US Foreign Account Tax Compliance Act (FATCA) and the agreement between the United States and India, Indian banks and other financial institutions report certain US account information through the Indian government to the IRS. This page explains how that reporting works and why it matters for your filings.
Why this reporting exists
FATCA was enacted in 2010. It requires foreign financial institutions to identify US account holders and report their accounts to the IRS, or to their own government for transmission to the IRS. Institutions that do not comply can face a 30% withholding tax on certain US-source payments they receive. Many countries, including India, entered into intergovernmental agreements (IGAs) that route reporting through their own tax authorities. Critics have described the withholding threat as coercive, while supporters describe it as the mechanism that makes global account reporting work. Both views describe the same design: the withholding penalty gave foreign institutions a strong reason to report.
The reporting chain
- Identification: an Indian bank or other financial institution identifies accounts held by US persons, using the self-certifications and documents collected when the account was opened.
- Registration: the institution registers on the FATCA registration website to be treated as compliant, and the IRS issues it a Global Intermediary Identification Number (GIIN).
- Reporting to the Indian authority: the institution reports the account information to the Indian tax authorities under India's FATCA rules.
- Exchange with the IRS: the Indian competent authority transmits the information to the IRS through the International Data Exchange Service, using the FATCA XML format.
- Matching: the IRS compares the information with tax returns, FBAR filings and Form 8938 filings.
What is reported and when
| Item | General rule |
|---|---|
| Who is reported | US reportable accounts, meaning accounts held by US persons or entities with substantial US ownership |
| Information | Account holder identity and taxpayer identification number, account balance or value, and certain income or payments |
| Exchange deadline | Within nine months after the end of the calendar year to which the information relates |
| Transmission | Through the competent authorities and the IRS International Data Exchange Service |
| Reciprocity | The IRS commits to exchange information with India on the same schedule, under confidentiality and data safeguard rules |
Transition and effective dates
The India arrangement includes a transition period for calendar years 2014 and 2015, during which good-faith efforts are taken into account. The arrangement applies to information for years before its operative date, and the operative date depends on the entry into force of the agreement and the signature of the arrangement by both competent authorities. Check the signed text for the exact date rather than relying on summaries.
Indian law
In India, the reporting obligations are set out in the Income-tax Act and the rules made under it for FATCA. The exact sections and rule numbers have been amended over time, so confirm the current provisions with an Indian tax adviser when a question arises about a particular bank or account.
Questions people ask
- Will my Indian bank tell me it reported me? Banks may ask for a self-certification and TIN when you open or update an account. Keep copies of what you submit.
- Can the IRS see my NRE or NRO account? If the account is a reportable account under the agreement, the information can be reported. Treat all Indian accounts as potentially visible to the IRS.
- Does reporting mean I owe tax? No. Reporting makes information visible. Whether you owe tax depends on your income and filings.
General educational information based on the US-India FATCA framework and IRS publications. Agreements, rules and institutions' procedures change over time. Confirm the current terms and consult a qualified tax professional before acting.