FBAR vs FATCA: Which Foreign Account Reporting Do I Need?

As a non-resident Indian living abroad, you may have financial assets in India. Assets such as mutual funds, shares, bank accounts, ULIPs, real estate, and more. Although these assets remain in India, the US tax authority mandates that you disclose these foreign assets entirely under two key reporting requirements.

1: FBAR (Foreign Bank Account Report - FinCEN Form 114)
2: Form 8938 (Statement of Specified Foreign Financial Assets - IRS Form)

Now, both forms relate to foreign asset reporting, but their purposes differ, and they are submitted to different authorities. Additionally, these forms have different compliance rules and thresholds.

In this blog, we will understand the FBAR vs Form 8938 differences in detail so you never confuse the two, stay compliant, and manage your cross-border NRI taxation without attracting penalties.

Do NRIs Need to File Both FBAR and Form 8938?

If you are an NRI living in the United States, you may need to file both FBAR and Form 8938 — not just one.

Many NRIs assume that filing one form is enough. However, these forms serve different purposes and are required under different regulations. In many cases, both filings are mandatory.

Failing to file either of them correctly can lead to significant penalties from the IRS or FinCEN.

Example: When an NRI Needs to File Both

Rahul, an NRI living in the USA, holds the following assets in India:

• ₹30 lakh in Indian bank accounts
• Investments in mutual funds
• Rental income from property

Since the total value of his foreign accounts exceeds $10,000, he must file an FBAR. Additionally, because his total foreign assets exceed IRS thresholds, he is also required to file Form 8938.

If Rahul files only FBAR and skips Form 8938, he may face IRS penalties despite partial compliance.

What is FBAR (FinCEN Form 114)?

The full form of FBAR is Foreign Bank Account Report (FBAR). This form is not filed with the IRS but with FinCEN. US-based NRIs use this form to report foreign financial accounts if their combined value exceeds a set threshold.

Who Needs To File FBAR?

• Foreign bank account holders
• Demat or trading accounts outside the USA
• Foreign mutual funds
• Accounts with signatory authority (e.g., power of attorney)

FBAR Filing Requirements

• Threshold: Aggregate value exceeds $10,000 at any time during the year
• Deadline: April 15 (Automatic extension to October 15)
• Filed With: FinCEN

Penalties

• Up to $10,000 for non-willful violations
• Up to $100,000 or 50% of account balance for willful violations

What is Form 8938 (IRS Form 8938)?

Form 8938 is used to report foreign financial assets and is submitted along with your annual IRS tax return (Form 1040).

In simple terms, IRS Form 8938 is used by US taxpayers to report specified foreign financial assets if the total value exceeds certain thresholds.

Who Needs to File Form 8938?

• Foreign companies or partnerships
• ULIPs, PMS, AIFs
• Foreign retirement accounts
• Foreign trust assets
• Rental property income via foreign entity

Filing Requirements Form 8938

Thresholds vary by residency and filing status:

• Single filer (USA): >$50,000 (year-end) or >$75,000 (anytime)
• Married filing jointly abroad: >$400,000 (year-end) or >$600,000 (anytime)

Other Details:

Deadline: April 15 (extensions align with Form 1040)

Filed With: IRS

Penalties

• $10,000 initial penalty
• Up to $50,000 for continued non-compliance
• Possible criminal penalties

Key Differences Between FBAR and Form 8938

Common Mistakes NRIs Make

• Assuming FBAR and Form 8938 are the same.
• Filing only FBAR and ignoring Form 8938.
• Not reporting Indian mutual funds or investment accounts.
• Missing thresholds due to lack of awareness.

Why Accurate Filing Of Form 8938 and FBAR Is Important For NRIs

The United States taxes global income of its tax residents. Therefore, NRIs with financial assets in India must disclose these assets even if taxes are already paid in India.

Failure to comply can result in:

• Heavy civil and criminal penalties
• IRS audits and scrutiny
• Loss of foreign tax credit benefits

The Bottom Line

In a nutshell, FBAR is foreign financial accounts and signature submission, which was reported to FinCEN. Form 8938 is broader foreign assets and income interests and is reported to the IRS along with your US tax return.

To avoid last-minute tax complexities and remain compliant, it is advisable to seek professional guidance from a cross-border taxation expert. One such expert in NRI taxation is Savetaxs.

Our experts bring more than 30 years of combined experience in NRI taxation. We can provide you with high-end consultation on FBAR & Form 8938 Filing Services, NRI tax return filing in India and the United States, DTAA claims and cross-border structuring, and global mobility and asset reporting compliance.

Contact us today as we serve our clients 24/7 across all time zones.