Indian property and FATCA — what US-resident NRIs actually have to report

One of the most persistent NRI tax questions in the decade since FATCA's 2014 rollout is whether Indian real estate has to be reported on the US IRS's specified-foreign- financial-asset form, Form 8938. The answer is consistent: no for directly-held real estate, yes for property held indirectly through a foreign entity, and yes for the bank accounts and rental income that come with the property. Some US-resident NRIs have historically sold Indian property on the belief that FATCA made it "reportable" — that belief is wrong, and the sale often creates more FATCA exposure than the hold would have. This page is the 2026 working guide.

The starting principle — direct real estate is not a "financial asset"

FATCA Section 6038D and Form 8938 require US taxpayers to report specified foreign financial assets above threshold. The IRS's published list of what is and is not a financial asset:

Reportable on Form 8938:

Financial accounts held at foreign financial institutions (FFIs) — depository accounts (savings, current, NRE, NRO, FCNR), custody accounts, demat accounts, mutual fund folios.
Securities or stocks held outside the US not through a US broker — Indian listed equities held in demat, unlisted shares, foreign debt instruments.
Interests in foreign entities — partnership interests, shares in foreign corporations, beneficial interests in foreign trusts.
Foreign mutual funds, hedge funds, ETFs.
Foreign life insurance with cash value, foreign annuity contracts.
Foreign pension and retirement accounts — EPS, EPFO, PPF, NPS, superannuation — are generally reportable (thresholds and valuations apply).

Not reportable on Form 8938:

Foreign real estate held directly as an individual — a flat in Mumbai, a plot in Bangalore, a house in Chandigarh, an agricultural-land parcel retained from pre-NRI days — not a specified foreign financial asset.
Personal use tangible property in a foreign country — a car, jewellery, art, antiques, furniture.
Foreign currency held physically, not at an FFI.
Safety deposit boxes at foreign banks — not considered a financial account (the contents may be reportable if they are themselves financial assets).

The direct real estate exclusion is unambiguous in the IRS guidance and has not changed. An NRI owning an Indian flat, villa, plot, or house directly in their own name does not tick the Form 8938 reporting box for that real estate.

The two exceptions that catch people

1. Property held through a foreign entity

If the Indian property is held through a foreign corporation, LLC, partnership, or trust, the interest in the entity is reportable — not the property directly.

A US citizen / GC holder owning Indian property through a UK LLC, a Dubai free-zone company, a family trust registered in Jersey, or any similar structure — the entity interest is reportable on Form 8938 if the overall threshold is crossed.
The underlying property is reported indirectly, through the entity valuation.
This pattern is uncommon for individual NRI residential ownership but arises in business / commercial property contexts.

2. The bank account receiving rental income

The NRO (or resident, for FEMA-non-resident situations) bank account at an Indian bank that receives the rent credits is a reportable financial account.
Counts toward both the Form 8938 aggregate and the FBAR aggregate.
So even directly-held real estate generates a reporting obligation via the bank account it links to.

This is the most common misconception — "the property isn't reportable, so I have no FATCA obligation" — forgets that the rent and security-deposit cash flow through an Indian bank account, which is squarely reportable.

FBAR — the parallel obligation

FBAR (FinCEN Form 114) is a separate filing from Form 8938 though often confused with it. For Indian property positions:

NRO bank account receiving rent — reportable if aggregate across all foreign financial accounts exceeds US$10,000 at any point in the calendar year.
Filed separately from the 1040 directly to FinCEN.
Penalty for missing FBAR: US$10,000 per non-wilful violation; up to 50% of account balance for wilful violations.

For the full FBAR-vs-FATCA comparison see FBAR vs FATCA compared.

Form 8938 thresholds — 2026

FATCA thresholds vary by filing status and residence:

Filing status	End-of-year aggregate	Any-point-during-year aggregate
Single / HoH (US resident)	US$50,000	US$75,000
MFJ (US resident)	US$100,000	US$150,000
Single / HoH (living abroad)	US$200,000	US$300,000
MFJ (living abroad)	US$400,000	US$600,000

Aggregate is across all reportable foreign financial assets combined. The NRO account, PPF (if held), EPF / EPS, mutual fund folios, direct equity, life insurance — all count toward the aggregate.

Income from Indian property — what IS reportable

Ownership status is one axis; income is the other. A US citizen or GC holder must report the following Indian-property-related income on the US 1040:

Rental income

Reported on Schedule E (Supplemental Income and Loss) of Form 1040.
Gross rent in USD at the year-average conversion rate (or spot rate on each receipt).
Deductible expenses — Indian property-tax payments, repair and maintenance, municipal fees, property-management fees, depreciation at IRS rates (not Indian rates — see below).
US depreciation — US tax law requires depreciation on rental property under MACRS, 30 years for residential / 40 years for non-residential. You cannot choose not to depreciate for US tax purposes.
Foreign Tax Credit (Form 1116) for Indian tax paid on the rental income.
Disallowed losses — rental losses on Indian property may be limited by the US passive- activity loss rules (Section 469).

Capital gains on sale

Reported on Schedule D of Form 1040.
Gain in USD calculated as (Sale proceeds in USD) minus (Cost basis in USD at the time of acquisition) minus (Indian selling costs in USD).
Long-term vs short-term — US holding-period rule: LTCG if held > 1 year.
Depreciation recapture under Section 1250 — the cumulative depreciation claimed over the years is recaptured at 25% on sale. A common shock for US taxpayers selling Indian rental property.
Foreign Tax Credit for Indian LTCG tax paid (12.5% post-July 2024 + surcharge + cess).
Currency gain / loss between purchase and sale can separately create gain / loss under some interpretations.

Inheritance receipts

Receipt of Indian property by inheritance is not income — not reportable as income.
Form 3520 may be triggered if the total inheritance value from a foreign person exceeds US$100,000 in the calendar year. Reporting-only, no tax on the inheritance.
Subsequent rental / capital gains on the inherited property are reported as above.
Cost basis — US rules provide stepped-up basis to FMV at the date of death for inherited property, which reduces future US capital-gains exposure.

The India-US DTAA allocation

Article 6 — Income from Immovable Property

India (as source state) has the primary right to tax rental income from Indian property.
"May be taxed" in India does not mean exclusively — US retains its worldwide-tax right under the saving clause for US citizens and residents.
Outcome — India taxes the rent; US taxes the rent; Form 1116 Foreign Tax Credit eliminates double tax in most cases (subject to per-country FTC limitations).

Article 13 — Capital Gains

India has the right to tax capital gains on sale of Indian immovable property by a non-resident.
US taxes the same gain for its citizens / GCH.
FTC for Indian tax paid.
Some capital-gains categories in Article 13 are allocated to the residence state; Indian real-estate capital gains are a source-state category that India taxes first.

For DTAA mechanics generally see DTAA and how it works.

The India side — as relevant context

An NRI seller's Indian tax on property sale:

TDS under Section 195 by the buyer at the applicable LTCG / STCG rate on the full sale consideration:
- LTCG post-July 2024: 12.5% without indexation (or 20% with indexation for property acquired before 23 July 2024, at the seller's option).
- STCG: at applicable slab rates; effectively 30%+ for most NRI sellers.
- Section 206AA — 20% floor if no PAN.
Section 197 Lower-Deduction Certificate — apply to AO in advance to get lower withholding matching actual tax liability.
Indian return filing — reconcile TDS and claim refund of over-withholding.
Section 54/54F/54EC exemptions for reinvestment — available to NRIs on the same terms as residents.

For the full India-side selling framework see US NRI property in India and buying and selling property in India.

"Should I sell my Indian property to escape FATCA?"

This question surfaces repeatedly and the answer is no.

Why the question is based on a false premise

Direct-ownership Indian real estate is not reportable on Form 8938 regardless of value.
The NRO bank account handling rent is reportable but continues to exist whether the property is sold or held.
Selling generates significant India-side TDS + capital-gains tax that is avoided by holding.
The US 1040 continues to need rental-income reporting until sale.

Why selling often makes FATCA exposure worse

The sale proceeds, deposited in the NRO account, increase the FBAR / FATCA aggregate on the bank-account axis.
Eventual repatriation under Form 15CA / 15CB — also not a FATCA / FBAR triggering event, but the concentration of the sale-proceed credit pushes the account balance across thresholds.
Reinvestment in Indian mutual funds, corporate bonds or shares to defer Indian capital-gains tax under Section 54F creates additional specified foreign financial assets reportable under FATCA.

Legitimate reasons to sell

Market timing, exit from Indian-market exposure, family-settlement requirements — all valid. "FATCA disclosure fear" is not a valid reason; the disclosure doesn't exist in the form feared.

Mortgages on Indian property

Some NRIs hold Indian property subject to a mortgage from an Indian bank / HFC. FATCA treatment:

Liabilities are not reported on Form 8938 — FATCA reports assets, not debts.
The property itself continues to be non-reportable (direct real estate).
Mortgage-interest deduction on US 1040 — for a US-qualified residence (not a rental) the primary residence plus one second home can qualify; Indian property can be the "second home". For rental property, mortgage interest is deductible against rental income on Schedule E.
The bank loan account with the Indian lender is usually not a depository account (it is a liability account) — not an FBAR / FATCA reportable asset.

Form 3520 — inheritance and gifts of Indian property

Inheritance of Indian property by a US person from an Indian-resident decedent — Form 3520 required if total inheritance from foreign persons exceeds US$100,000 in the calendar year.
Gift of Indian property by an Indian- resident relative to a US-resident — same US$100,000 threshold.
Reporting only; no tax triggered by the inheritance or gift itself.
Penalty for missing Form 3520 — 5% per month of the gift / bequest value, capped at 25%. Takes very seriously.

For the Indian-side gift treatment see gift tax in India.

What the Indian FATCA IGA changed

India signed an Inter-Governmental Agreement (IGA Model 1) with the US in July 2015. Effects:

Indian banks report US-person account-holder balances to the CBDT, which forwards to the IRS annually.
NRIs who are US persons have been reported by their Indian banks since 2016.
Aadhaar / PAN / passport / US SSN-or-ITIN are collected by Indian banks at KYC for FATCA flagging.
Non-compliance of disclosure — if the IRS sees your Indian-account balance reported via the IGA but no Form 8938 in your 1040, audit selection is mechanical.

So even though you self-assess FATCA obligations, the IRS has independent verification of the reportable Indian bank accounts.

Common pitfalls

Believing the property is reportable. It is not (when held directly).
Forgetting the bank account is reportable. NRO rental-receipt account clears the FBAR and FATCA thresholds more easily than expected.
Missing FBAR altogether under the assumption that no property means no reporting.
Not filing Form 8938 when aggregate crosses threshold on non-real-estate assets (MF, PPF, EPF, demat, NRE/NRO).
Claiming "real estate is not income" for rent. It is income; reportable on Schedule E.
Skipping MACRS depreciation on US side because India taxes gross rent with standard 30% deduction. US depreciation is still required.
Forgetting Section 1250 depreciation recapture on sale — a nasty surprise if years of rental depreciation were claimed.
Selling to "get ahead of FATCA" — avoidance of a non-existent reporting obligation, triggering real tax.
Buying Indian mutual funds / life insurance with sale proceeds under the belief that "funds aren't real estate". Indian MF and life insurance are specified foreign financial assets and squarely reportable.
Holding Indian property through an offshore entity to "simplify reporting" — creates a reportable entity interest and PFIC exposure.
Missing Form 3520 on inherited Indian property above US$100,000.
Ignoring US property tax rules on foreign rental — currency translation, passive- activity loss limits, depreciation recapture, PAL carryforward.

Checklist — FATCA position on Indian property held by a US person

Hold the property directly? If yes, no Form 8938 real estate reporting.
Hold through a foreign entity? Report the entity interest on Form 8938 if threshold crossed.
Rental income? Report on Schedule E in USD; claim MACRS depreciation; Form 1116 FTC for Indian tax paid.
Rental account in India? Report the NRO / other bank account on Form 8938 (aggregate-threshold check) and on FBAR (US$10,000 aggregate check).
Aggregate other foreign financial assets (EPF, PPF, MF, demat, life insurance) for Form 8938 threshold testing.
Sold Indian property during the year?
- Indian side: Section 195 TDS, return filing, Section 54/54F/54EC if reinvesting.
- US side: Schedule D capital-gain reporting, depreciation recapture under Section 1250, Form 1116 FTC.
Inherited Indian property? Form 3520 if total inheritance from foreign persons exceeds US$100,000.
Treaty position taken? Form 8833 where applicable.
FBAR filed by 15 April (automatic extension to 15 October) on all Indian financial accounts.
US return filed with all of the above properly attached.

Summary

Indian real estate held directly by an individual is NOT reportable on Form 8938. This has been the consistent IRS position since FATCA's inception.
Foreign-entity-held Indian real estate — the entity interest is reportable.
The bank account receiving Indian rental income is reportable on both Form 8938 and FBAR.
Rental income is US-taxable on Schedule E in USD; deductible expenses include MACRS depreciation; Form 1116 FTC for Indian tax paid.
Capital gains on sale are US-taxable on Schedule D; Section 1250 depreciation recapture applies at 25%.
DTAA Article 6 allocates primary taxing right to India on rental income; Article 13 for capital gains; US taxes as well under the saving clause with FTC relief.
Form 3520 for Indian inheritance / foreign-person gifts above US$100,000 — reporting-only.
The India-US FATCA IGA (2015) means the IRS receives Indian-bank reports on US-person accounts; non-disclosure is mechanically detected.
"Sell to avoid FATCA" is a bad plan — property wasn't reportable; the sale creates real India-side tax and doesn't eliminate reporting on the resulting cash position.

For the FBAR vs FATCA distinction, see FBAR vs FATCA compared. For the US-side selling-NRI-property mechanics, see US NRI property in India. For NRI taxation of Indian property income, see NRI taxation in India. For US tax filing generally for NRIs, see US tax filing for NRIs. For the DTAA framework, see DTAA and how it works. For gift-tax treatment in India, see gift tax in India. For property transactions involving NRIs, see buying and selling property in India. For repatriation of sale proceeds, see transferring funds from India.