FBARs and Non-Resident Indian Accounts

By Expat News

What is FBAR? Does my Nonresident Indian Account have anything to do with FBARs? Should I report my NRO on expatriate tax returns?

We reviewed earlier the definition of FBARs (please see What is FBAR). Now let’s talk about Indian Nonresident Accounts.

Let’s review the case of Arvind Ahuja, a prominent neurosurgeon in Wisconsin. Arvind was convicted on August 23, 2012 on two counts by a federal jury. The first count was in regards to filing a false expatriate tax return for the tax year 2009. The second count was a failure to file the form TD F90-22.1, Report of Foreign Bank and Financial Accounts, the FBARs.

Ahuja was originally indicted on four counts for a failure to file expat tax returns and FBARs in tax years 2006 to 2009. However, his trial team helped him get off conviction for other years.

What kind of mistake did Ahuja make on his overseas tax returns?

Per the indictment filed against Arvind Ahuja, the taxpayer conspired with representatives of HSBC bank in New York and decided to hide his offshore foreign accounts located in India and the Bailiwick of Jersey. Moreover, he invested money in certificates of deposit through these foreign bank accounts and earned about $2.7 million in interest income that he didn’t report on his expatriate tax return or FBARs. In regards to the FBARs requirements, he didn’t indicate the existence of these accounts on his US expat tax return. He didn’t file the FBARs either.

Nonresident Indian accounts have been an attractive investment tool for NRI for two main reasons. The first reason is that these accounts have very favorable tax rates. The second reason is that the Indian government doesn’t impose a tax on the interest earned on these accounts.

However, nonresident Indians who are US persons are taxed on a worldwide income in the USA. Also, they have to file the FBARs. However, some of these nonresident Indians reported that HSBC representatives misguided them in regards to reporting requirements. Per these NRIs, the HSBC bankers told clients that the clients should not pay any tax on this interest income in the USA and HSBC India would not report this information to the IRS. Later HSBC India announced that it suspended private offshore services to U.S. residents.

Conclusion

If you are a nonresident Indian who currently resides in the USA, you should learn more about FBARs and expatriate tax returns. The IRS has stepped up efforts to identify unreported accounts in Europe. However, the IRS has noticed a substantial trend of unreported foreign accounts in Asia. If you are a nonresident Indian who failed to timely file expatriate tax returns and FBARs, please seek an advice of a CPA that provides international tax services.