I bought some FMPs mutual funds (Fixed maturity plan) with 3 and 5 year maturities as an Indian resident. Now, I will be working in USA for a couple of years. These FMPs will mature while I will be a US resident. Will the maturity of the FMPs be treated as regular LTCG or PFIC by the IRS?

From Flame > Knowledge Center > What are fixed maturity plans & double indexation (http://flame.org.in/KnowledgeCenter/Whatarefixedmaturityplansdoubleindexationbenefit.a spx) :

FMPs are similar to closed debt mutual funds. You buy some units when the fund is open. After n years, you get the same unites back but the value of each unit is higher. In India, it is treated as capital gains.

FMPs are closed-ended mutual fund schemes, with a pre-specified tenure. FMPs are usually offered for tenures varying from 30 days to five years.

As said earlier, FMPs are somewhat similar to bank FDs, in that the money invested is locked in for the tenure of the scheme. FMPs are debt funds that invest in government securities and company debt. FMPs typically have no equity component, unless you invest in an FMP that chooses to have a limited equity component.

Thank you for reading.

In my opinion, the increased value of the FMPs would be treated as ordinary income rather than capital gains similar to the PFICs.

The reasoning behind my opinion is that the FMPs have a guaranteed similar to FDs/CDs, and thus no risk associated with an equity position.