[shnbhattacharya]

Hi,

If I hold mutual funds in India will they be treated as Passive Foreign Account?

Please advise.

[AtlantaTaxExpert]

They are passive investments, but, if you are a U.S. citizen or a U.S. resident, you must pay taxes on the dividends and realized capital gains on your U.S. tax return.

Assuming you pay similar taxes to India, you can avoid double taxation by claiming the Foreign Tax Credit (Form 1116) on the passive investment.

[shnbhattacharya]

Hi
US Resident= More than 183 days in USA,am I correct?In India Dividends are tax free.Also till the time we sell mutual funds,we do not receive a distribution.I heard PFICs are taxed differently

[AtlantaTaxExpert]

Yes, U.S. residency happens if you stay more than 183 days in a calendar year.

[shnbhattacharya]

So for PFICs the taxation will follow separate rules?Is that correct?

[AtlantaTaxExpert]

Not sure; what does PFIC stand for?

[shnbhattacharya]

Here are the details of PFIC

Internal Revenue Bulletin - November 1, 2004 - Notice 2004-70

[AtlantaTaxExpert]

Rules for PFICs are, to my knowledge, the same as for foreign mutual funds.

[shnbhattacharya]

Hi Sorry was travelling.For PFIC it looks like IRS excepts them to report on a separate form called 8621.It provides 3 methods for reporting Excess Distribution,Mark to market and QEF.

Also it looks like for foreign insurance,and retirement funds which are trusts, they expect to file Form 3520,for transaction with trusts.

Also for non-qualified foreign retirement plans looks like IRS plans to tax them the same way as a saving account.
Not sure why the reporting has been made so complex.