🧾 Decoding FATCA: What NRIs Must Know in 2025

If you're an NRI, especially one living in the U.S. or holding financial assets globally, chances are you've heard of FATCA. But what exactly is it? Why are Indian banks asking for FATCA declarations? And what are the implications if you don’t comply?

In 2025, FATCA continues to be a major regulation affecting how NRIs manage their Indian and foreign financial assets. Here's everything you need to know to stay informed and compliant.

📘 What is FATCA?

FATCA stands for Foreign Account Tax Compliance Act.

Introduced by the U.S. government in 2010, FATCA was designed to prevent tax evasion by U.S. taxpayers holding assets outside the U.S.

But since then, its scope has widened through international agreements, including with India, affecting millions of NRIs.

🌍 FATCA & India: The Basics

India signed a FATCA agreement with the U.S. in 2015. Since then, Indian banks, mutual funds, and financial institutions are required to:

• Collect FATCA declarations from account holders
• Report financial account information of U.S. persons or NRIs to the Indian tax authorities
• Share that data with the U.S. Internal Revenue Service (IRS)

📌 Key point: If you're an NRI with U.S. tax obligations, Indian banks must report your accounts under FATCA rules.

👤 Who Does FATCA Apply To?

FATCA applies to:

1. U.S. Citizens (even if living abroad)
2. Green Card Holders
3. U.S. Tax Residents (anyone meeting the U.S. Substantial Presence Test)
4. Dual Citizens or NRIs with U.S. Ties (including those born in the U.S.)
5. NRIs Holding Joint Accounts with U.S. Persons

If you fall into one of these categories, you're considered a “U.S. Person” under FATCA, and your Indian financial data may be reported to the IRS.

🏦 What Financial Accounts Are Reported?

Indian institutions report the following if thresholds are met:

• Bank savings and fixed deposits
• Mutual fund holdings
• Insurance policies with investment value (ULIPs, endowment plans)
• Demat accounts and stock investments
• Pension funds like NPS

✅ Threshold: If the aggregate value of all foreign financial assets exceeds $50,000 (varies for joint accounts and filing status), it must be reported.

📝 What is a FATCA Declaration?

This is a self-certification form that you must submit when:

• Opening a new bank or mutual fund account in India
• Updating KYC documents
• Investing in Indian markets or NRE/NRO accounts

It typically includes:

• Your tax residency status
• TIN (Tax Identification Number) if you’re a U.S. taxpayer
• Details of your citizenship and place of birth

🔒 Providing false information can lead to account freezing, penalties, and compliance issues.

⚠️ What Happens If You Ignore FATCA?

1. Account Freezing
2. Indian banks and mutual funds can freeze your accounts until you submit FATCA details.
3. Global Tax Scrutiny
4. U.S. citizens failing to report foreign assets may face IRS penalties up to $10,000+ for non-compliance.
5. Double Trouble
6. You may also be scrutinized under CRS (Common Reporting Standard), a similar global framework for tax sharing.

💰 FATCA vs CRS: What’s the Difference?

Aspect FATCA CRS

Initiated By United States OECD (Global Initiative)

Applies To U.S. taxpayers only All tax residents of CRS signatory countries

India Participates Yes Yes

Reported To U.S. IRS via Indian govt Indian Income Tax Department

✅ What Should NRIs Do in 2025?

1. Know Your Tax Residency

Determine if you’re a U.S. tax resident or liable to file in another country.

2. Submit FATCA Self-Certification

Submit the required declaration to all your Indian financial institutions—even if you’re not a U.S. citizen. Better safe than sorry.

3. Keep Documentation Updated

Your PAN, passport, foreign TIN, and proof of address should be consistent and accurate across banks.

4. Hire a Tax Professional

If you're a U.S. citizen or dual-resident, consult a tax advisor familiar with cross-border compliance and Form 8938 / FBAR filings.

5. Stay Transparent

Avoid offshore schemes or underreporting. Tax authorities across countries are more connected than ever.

📣 Final Thoughts

FATCA is not just another tax form—it’s a serious international compliance tool. For NRIs, especially those with ties to the U.S., it impacts how you invest and report your finances in India.

The good news? Staying compliant is simple if you’re honest, informed, and proactive. With the right paperwork and expert help, you can invest confidently without fear of penalties or account blocks.

🔗 Need help navigating FATCA, CRS, or NRI tax planning in 2025?

Explore AbroadSaathi.com for clear guides, trusted advisors, and the latest updates for global Indians.