What is FBAR?

Don't confuse FBAR with Form 8938. I initially thought they were basically the same filing.

They're different reporting requirements.

FBAR is filed electronically with FinCEN using FinCEN Form 114. It isn't attached to your federal income tax return.

Form 8938, on the other hand, is filed with your federal income tax return when the applicable foreign-asset reporting thresholds are met.

And you can potentially have to file both.

The reporting thresholds for Form 8938 are generally different from the FBAR $10,000 threshold, depending on your filing status, residency and other circumstances. The IRS specifically says that filing Form 8938 does not replace the obligation to file an FBAR.

So if you're an Indian-origin U.S. taxpayer with NRE/NRO accounts, I wouldn't assume that filing one automatically takes care of the other.

I had the same question about whether Indian accounts count.

If you're a U.S. citizen or U.S. tax resident, the fact that the account is in India doesn't by itself exclude it from FBAR reporting.

The IRS specifically mentions foreign bank accounts, brokerage accounts, mutual funds and other financial accounts when explaining FBAR requirements.

So an NRI living in the U.S. can potentially have an FBAR obligation for Indian accounts.

One thing to be careful about is calculating the maximum value during the year. You aren't simply reporting whatever the balance happens to be on December 31.

The IRS says FBAR filers need to reasonably determine the greatest value of the foreign financial accounts during the calendar year and convert the amount to U.S. dollars using the applicable exchange-rate rules.

That's why someone whose Indian accounts are normally below $10,000 could still have an FBAR filing requirement if the combined balance temporarily went above the threshold.

The $10,000 point is probably the most important thing to understand.

FBAR generally applies when a U.S. person has a financial interest in, or signature or other authority over, foreign financial accounts and the aggregate value of those accounts exceeds $10,000 at any time during the calendar year.

So you don't look at each account separately.

For example:

• Indian savings account: $4,000
• NRO account: $3,500
• NRE account: $2,000
• Indian FD: $2,000

The combined amount would be $11,500 if those are the relevant maximum values, so the $10,000 FBAR threshold could be exceeded.

The threshold is based on the combined value of the reportable foreign accounts, not simply whether one individual account has more than $10,000.

Also, the requirement isn't limited to people who actually earn income from their foreign accounts. The FBAR is an information-reporting requirement.

I've been filing FBARs for several years while living in the U.S. One mistake I almost made was assuming that accounts with small balances didn't matter. My tax preparer explained that it's the aggregate value of all reportable foreign financial accounts that's important for determining whether the filing requirement applies.

I now keep a spreadsheet of my overseas accounts throughout the year because it makes preparing the report much easier.

I had a similar question when I became a U.S. tax resident. Besides my Indian bank accounts, I also had a demat account. My accountant reviewed all my foreign financial accounts before deciding what needed to be reported.

One thing I learned is that FBAR is filed electronically and has a different filing process from the regular tax return. If you're unsure whether a particular account needs to be included, it's worth checking with a qualified tax adviser because the reporting rules can be quite detailed.