[somu_banerjee]

Hi

Are the following considered as part of income by IRS

I want to know if the following accounts are reportable:

PPF(Public Provident Fund)

http://www.indiapost.gov.in/POSBActs/PPFRules1968.pdf


2. Employee Provident Fund

Employees' Provident Fund Organisation of India - Wikipedia, the free encyclopedia

3. Employee Pension Fund

EPFO

4. Also if I have a private pension fund which internally holds Foreign Securities and Corporate Bonds,then the interest from those,are they reportable?

Do we need to report the above for FBAR Purpose?

[AtlantaTaxExpert]

The income that the pension funds earn are NOT subject to U.S. income taxes, because ethey are considered tax-deferred pensions.

However, to be safe, report the max value of the various funds on the FBAR. Provident funds which are directly invested with the Indian government are NOT reportable on the FBAR, but the funds you describe below do not, In my opinion, meet the criteria for being a direct government pension fund and thus ARE reportable on the FBAR.

[DaB123]

A defined-benefit type plan ( a conventional pension) is not reportable for FBAR purposes, and there is no income from the fund until you get the pension (it may or may not be taxable at that time).

A private define contribution account (like an American 401(K) or an IRA) is reportable for FBAR purposes, and since there is no treaty provision, the income is taxable in the US


So it seems that 1 and 2 are both FBAR reportable and taxable, 3 is likely neither until you get the pension (assuming again, that it is a defined 'benefit' pension). 4 is unclear, but is likely FBAR reportable AND taxable.

[somu_banerjee]

Hi
The provident fund account is(EPF) is maintained by a subsidiary of the Ministry of Labour.The funds cannot be withdrawn until retirement.

However it could be withdrawn for specific reasons like house construction/repair,payment of mortgage,ill ness of self or family members.

It pay interest of 8.25-9% yearly.So do I need to report these interest as a taxable income.My understanding is unless I withdraw money from this fund it is not considered as income,but will look fwd to clarification.

2. I can report the interest earned from Public provident fund per year.



3. The employee pension fund,is one which runs on employer contributions
,it has the obligation that post retirement one can obtain 1/3 of the corpus as lumpsum and has to use mandatorily 2/3 of the corpus to buy annuity from a provider and will receive monthly pension from it.


4. We also have a private pension fund which offers similar options,except that it can be surrendered earlier,one can keep 10% of the proceeds and mandatorily has to use 90% of it to buy annuity.


So my question is do all these except Public Provident Fund are considered as yearly income,or they will be considered income only when they are vested.

[AtlantaTaxExpert]

In my opinion, items #1 and #3 are NOT taxable, while Items #2 and #4 probably ARE taxable.

To be safe, you should report ALL FOUR on the FBAR.

[DaB123]

It doesn't matter who holds the account. The only thing that matters is: Is it a personal account ? Can you get an account balance of some kind, even if its not easy to withdraw ? Then it is FBAR reportable.

Unless specifically exempt by treaty (and there is no such provision in the US India treaty), or unless they conform to very specific US rules (which is unlikely) 1 is taxable. This holds even if the income is not currently distributed. Or at the very least, all income would be taxable the moment you could withdraw it (say when you buy a house), whether you withdrew it or not.

I think 3 would be taxable as well, assuming there is no risk of forfeiture. For 3, that includes employer contributions to the plan as well (they are taxed as income as soon as they vest), not just income from the account.


As a pointer, here is some IRS guidance on Canadian retirement plans not covered by the US Canada treaty.

an individual
who is a citizen or resident of the United
States and a beneficiary of a Canadian
retirement plan will be subject to current
United States income taxation on income
accrued in the plan even though the
income is not currently distributed to the
beneficiary, unless the plan is an employees'
trust within the meaning of section
402(b) of the Internal Revenue Code and
the individual is not a highly compensated
employee subject to the rule of section
402(b)(4)(A).


A similar rule would follow for Indian retirement plans unless there are specific treaty provisions. If you really want to, you can ask the IRS for a Private Letter Ruling, but I doubt they would say differently.