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PFIC Tax Exposure Checker

Add each Indian mutual fund, ETF, or PFIC you hold as a US resident. See your estimated tax exposure range, how many Form 8621 filings you need, and whether the de minimis exception may apply to your situation.

What This Checker Estimates

This tool is not a tax return. It is a pre-filing awareness tool that gives you three outputs before you sit down with a CPA or file your US return.

  • Form 8621 filing count: The number of separate Form 8621 filings required, one per PFIC per year. Each Indian mutual fund, ETF, ELSS scheme, REIT, or ULIP you hold as a US resident generally requires its own form. This is one of the most common compliance gaps among US residents with Indian investment portfolios.
  • Estimated exposure range: The tool calculates a low-to-high range for your estimated PFIC tax exposure. The lower end reflects the Mark-to-Market (MTM) method. The upper end reflects the Section 1291 excess distribution method, which is what applies if no election was made. Both are explained below.
  • De minimis eligibility check: If your total PFIC value falls below the IRS de minimis threshold ($25,000 for single filers, $50,000 for married filing jointly), you may qualify for an exception from certain filing obligations. The checker flags this based on your total PFIC value and filing status.
  • Form 3520 risk flag: If you hold EPF, PPF, or NPS, the checker flags a potential Form 3520 review requirement. These accounts can be treated as foreign trusts under US tax rules, triggering reporting obligations separate from and in addition to your PFIC filings.

Which Indian Assets Are PFICs?

A Passive Foreign Investment Company (PFIC) is any foreign corporation that meets either an income test (75% or more of gross income is passive) or an asset test (50% or more of assets produce passive income).

Most Indian pooled investment vehicles qualify as PFICs. This includes equity mutual funds, debt mutual funds, ELSS tax-saving schemes, index funds, ETFs listed in India, REITs, and ULIPs. The IRS classifies these based on their structure, not their label in India.

What is generally not a PFIC

  • Direct holdings in individual Indian stocks
  • NRE and NRO fixed deposits
  • Indian government bonds held directly
  • NRE, FCNR, or GIFT City fixed deposits

What needs a PFIC-by-PFIC check

  • GIFT City AIFs and mutual funds (structure-dependent)
  • Certain insurance-linked products

For a complete breakdown of which Indian fund types qualify as PFICs and why, read our PFIC tax rules guide.

How to Use This Checker

Step 1: Set your PFIC filing information

Select your US filing status (single or married filing jointly). This determines your de minimis threshold. Enter the number of non-compliant years, meaning years in which you held PFICs as a US resident but did not file Form 8621. Indicate whether you have filed Form 8621 before. First-time filers have different considerations than those catching up after a gap.

Step 2: Check EPF, PPF, and NPS boxes if applicable

If you hold an Employee Provident Fund, Public Provident Fund, or National Pension System account, check the corresponding box. These can trigger Form 3520 (foreign trust reporting) requirements alongside your PFIC filings. The checker flags this risk so you can raise it with your advisor.

Step 3: Add each PFIC fund

For each Indian fund you hold, enter:

  • Fund name (for your reference)
  • Fund type (equity mutual fund, debt fund, ELSS, ETF, REIT, ULIP, or other)
  • Current value in INR (the checker converts to USD for the exposure estimate)
  • Cost basis in INR (your original purchase price, if known)
  • Years held as a US resident (used to calculate exposure under the excess distribution method)
  • Whether you sold or redeemed the fund during the review period

If you do not know your cost basis, check the "I do not know my cost basis" option. The checker uses a conservative estimate.

Step 4: Click Check PFIC Exposure

The output shows your total PFIC value, estimated exposure range, Form 8621 filing count, de minimis status, and any additional risk flags.

The Three PFIC Tax Methods: What the Exposure Range Reflects

The exposure range in the output reflects two of the three available PFIC tax methods. Understanding these helps you interpret what the range means.

Section 1291 (Excess Distribution Method) — the upper bound

This is the default method when no election has been made. It applies backward-looking taxation: when you sell or receive a distribution, the gain is allocated back across each year you held the fund as a US resident. Each allocated year is taxed at the highest ordinary income rate (currently 37%), plus an interest charge calculated daily from the year the gain is deemed to have accrued.

The result is that the tax and interest can swallow 50 to 70% of your total gain. This is the most punitive outcome and applies to anyone who has held Indian mutual funds without making an election.

Mark-to-Market (MTM) Election — the lower bound

Under MTM, you treat each PFIC as if it were sold on December 31 each year and pay ordinary income tax on the paper gain, even if you did not sell. The benefit: no interest charges, no backward-looking allocation. The tax rate is ordinary income, typically lower than the combined tax-plus-interest hit under Section 1291.

MTM is available for funds that are marketable, meaning regularly quoted on a market. Most Indian equity mutual funds with daily NAVs qualify. This election must be made in the first year you hold the fund as a US resident. Making it late requires catching up.

QEF Election — not included in the estimate

The Qualified Electing Fund election taxes you each year on your share of the fund's actual income and gains as ordinary income and long-term capital gains respectively. This requires the fund to provide specific financial data to shareholders. Most Indian mutual funds do not provide this, making QEF impractical for most Indian fund holders. This method is not included in the exposure range.

The De Minimis Exception: When Filing May Not Be Required

The IRS provides a de minimis exception that can exempt certain smaller PFIC holders from annual Form 8621 filing if no distributions were received and no dispositions were made.

Thresholds for 2026

  • Single filers: Total PFIC value below $25,000
  • Married filing jointly: Total PFIC value below $50,000

If your total PFIC holdings fall below your applicable threshold and you did not sell or receive distributions from any PFIC during the year, you may qualify for the exception.

Critical caveats

The exception does not apply if you have made a prior QEF or MTM election on any of these funds. Once an election is made, annual reporting continues regardless of value. The exception also does not eliminate FBAR or FATCA reporting obligations. Your foreign account balances may still need to be reported on FinCEN Form 114 and Form 8938 even if Form 8621 is not required.

The checker shows your de minimis status based on your inputs. Always confirm the exception applies to your specific situation before relying on it, particularly if you have prior elections or received unusual distributions.

EPF, PPF, and NPS: The Form 3520 Risk

If you hold an EPF, PPF, or NPS account as a US resident, you face a reporting question separate from PFIC.

The IRS has taken the position that EPF, PPF, and NPS accounts can be classified as foreign trusts under US tax law. If treated as foreign trusts, you may be required to file Form 3520 and potentially Form 3520-A. Missed Form 3520 filings carry penalties of 35% of the gross value of any property transferred to a foreign trust, or 5% of the trust's gross value per year for unfiled annual returns. These penalties apply in addition to any PFIC-related penalties.

The checker flags EPF, PPF, and NPS selections so you can raise this with a qualified CPA before filing.

What to Do If You Have Never Filed Form 8621

Because Form 8621 has no statute of limitations, an unfiled form leaves your entire 1040 tax return open for audit forever. The IRS can examine your entire return years later because of one missing PFIC form.

If you have held Indian mutual funds as a US resident without filing Form 8621, you are not alone and there is a compliance path available.

The Streamlined Filing Compliance Procedure allows non-willful non-filers to file the last 3 years of amended tax returns, catch up on PFIC reporting, and pay a reduced 5% miscellaneous offshore penalty (0% for those living outside the US). Non-willful means you were unaware of the requirement. Most people who simply did not know about PFIC rules qualify.

This checker is a useful starting point to understand your exposure before engaging a CPA for the catch-up process.

Frequently Asked Questions

What is a PFIC and do Indian mutual funds qualify?

A Passive Foreign Investment Company is any foreign corporation that earns primarily passive income or holds primarily passive assets. Most Indian mutual funds, ETFs, ELSS schemes, REITs, and ULIPs meet this definition under US tax rules. US-domiciled funds generally follow normal US tax rules and do not trigger PFIC treatment. The PFIC rules apply specifically to foreign-domiciled pooled investment vehicles. Direct holdings in individual Indian stocks are not PFICs.

Do I need to file Form 8621 every year even if I made no gains?

Form 8621 is the IRS disclosure form for each PFIC holding. If you invest in Indian mutual funds while living in the US, you are required to submit this form annually, regardless of whether you have made any gains or received distributions. The only exception is the de minimis rule for small holders who have not made prior elections and did not receive distributions or sell holdings during the year.

How much does PFIC tax cost compared to regular capital gains tax?

Under the default Section 1291 method, the cost can be extreme. The default excess distribution method means tax rates could hit over 50%. Under the Mark-to-Market election, you pay ordinary income tax on annual paper gains without interest charges, which is more predictable but still more expensive than the preferential long-term capital gains rates that apply to US-domiciled funds. The checker shows you the range between these two outcomes for your specific holdings.

What is the de minimis exception for PFIC reporting?

If your total PFIC holdings are below $25,000 (single) or $50,000 (married filing jointly), and you made no dispositions and received no distributions during the year, you may not be required to file Form 8621 for that year. This exception does not apply if you have made prior QEF or MTM elections on any of your PFICs. It also does not eliminate your FBAR or FATCA reporting obligations.

What happens if I sell my Indian mutual funds before moving to the US?

If you sell all your Indian mutual fund holdings before becoming a US tax resident, you eliminate your PFIC exposure going forward. Any gains on the sale are subject to Indian capital gains tax, not US PFIC rules, since you were not a US person at the time of sale. This is one of the most commonly recommended strategies for people who know they are moving to the US. Advisors recommend selling Indian PFIC holdings before becoming a US person.

Your Indian mutual funds may be costing you more than you think

Your first conversation is free. We will tell you exactly what filings you need and how to reduce your PFIC exposure.