Impact of investing in MF\'s in India by USC with OCI

[sbabumds]

Hello,

I had invested in MF's a few years back when I was a US-GC holder. I've paid the funds for investing in these MF's from my India NRE a/c and had send money to this NRE a/c from my US-Savings account. I have not sold any of my MT's since then. Now I'm planning to sell some of the MF's and I believe that I'll be selling a few funds on loss and few others on Profit. How do I have to treat these from the US tax filing perspective. I've not mentioned about this investment in my previous tax filings. Can someone help me with this question. Many thanks in advance.

[mudramantra99]

Amazing indeed!!!Your very first post and you are asking club members to advice you after the fact that you have evaded taxes.

[Sid]

Hello,

I had invested in MF's a few years back when I was a US-GC holder. I've paid the funds for investing in these MF's from my India NRE a/c and had send money to this NRE a/c from my US-Savings account. I have not sold any of my MT's since then. Now I'm planning to sell some of the MF's and I believe that I'll be selling a few funds on loss and few others on Profit. How do I have to treat these from the US tax filing perspective. I've not mentioned about this investment in my previous tax filings. Can someone help me with this question. Many thanks in advance.

File your old tax returns again. Pay the fine.

[Desi]

Hello,

I had invested in MF's a few years back when I was a US-GC holder. I've paid the funds for investing in these MF's from my India NRE a/c and had send money to this NRE a/c from my US-Savings account. I have not sold any of my MT's since then. Now I'm planning to sell some of the MF's and I believe that I'll be selling a few funds on loss and few others on Profit. How do I have to treat these from the US tax filing perspective. I've not mentioned about this investment in my previous tax filings. Can someone help me with this question. Many thanks in advance.

1. If your combined total any year in these all these accounts together exceeds $10K, you are required to file TDF 90-22.1 form. This form has to be filed every year if at any time during the year your balance exceeded 10k.

2. Any interest earned on NRE accounts is taxable in USA and should be reported in tax returns.

3. If you have purchased Mutual Funds, you do not have to report that on tax returns.

4. If your MF was purchased with a "dividend" option, then you must have received dividends and reporting of these dividends gets complicated due to PFIC. I recommend that you research the forum for threads that discuss PFIC. You may need services of a good tax expert. If on the other hand you bought your MFs with "Growth" option and not the dividend option, then you would not have received any dividends in which case this reporting is not an issue.

5. Upon sale, you have a taxable event of a PFIC investment and that needs to be reported per the PFIC rules. This does get complicated. One option of PFIC is to report every year on mark to market basis but you have not done that.

Of course, one option is to not report anything at all and that of course is wilful evasion of taxes that carries with it stiff penalties, interest and possibly more. In my view the best option for a US resident wishing to invest in Indian markets is to actually buy a MF in USA with symbol MINDX and this approach makes everything simple and avoids all PFIC and NRE account interest reporting etc. In that case even NRE account is not needed.

[sbabumds]

where is the question of evading taxes when I have not sold any of my funds. Am I missing something?

[sbabumds]

Trying to understand about filing my tax returns again. I've not received any income till date as I've never sold any of the MF's since investing in them. So, why do I've to file the old returns now.

[sbabumds]

Thanks for the quick response.

[zen]

Trying to understand about filing my tax returns again. I've not received any income till date as I've never sold any of the MF's since investing in them. So, why do I've to file the old returns now.

I'm also in the same boat like you and from what I understand, after doing research - we have to pay taxes on "unrealized income" from mutual fund investments. In my case, there is no dividend income but still need to account for the money in the investment.

If you still haven't filed amended returns, you may want to consider taking part in the OVDI 2011. See the following thread for more information:

http://www.r2iclubforums.com/forums/showthread.php/23763-Offshore-Voluntary-Disclosure-Initiative-or-Tax-Amends

[oasis138]

Amazing indeed!!!Your very first post and you are asking club members to advice you after the fact that you have evaded taxes.

How did you conclude that ? 33 posts in 3 years! Good!