A Passive Foreign Investment Company is any non-US company whose income or assets are mostly passive — interest, dividends, capital gains. A mutual fund is passive by definition, so every fund registered outside the United States falls into the category. The rules were written in 1986 to stop Americans deferring tax through offshore funds. They catch an ordinary Indian SIP just as easily.

It applies to US persons: US citizens, green-card holders, and anyone who is a US tax resident under the substantial presence test. That last group is the one people miss — an NRI in the US on an H-1B who meets the day-count test is a US person for this purpose, and their Indian mutual funds are PFICs from that year onward.

Every mutual fund scheme, whatever the category — equity, debt, hybrid, ELSS, index, liquid. Also Indian ETFs, gold ETFs, fund of funds, REITs and InvITs, Category III AIFs, GIFT City funds and ULIPs. The registry above sets out all twenty-two categories with the treatment for each.

Directly held Indian shares are not PFICs — operating companies never are. Nor are bank deposits, Sovereign Gold Bonds, or a PMS holding shares in your own name. US-listed India ETFs are US regulated investment companies, so they are outside the rules entirely while giving you the same market. That last point is the practical answer for most people.

Without an election you fall into the excess distribution regime under section 1291, and it is punitive by design. Your gain is spread evenly across every day you held the fund. The portion falling in earlier years is taxed at the highest ordinary rate for that year, whatever your actual bracket, and then carries an interest charge running from that year to now, compounded. There is no long-term capital gains rate and no offsetting of losses. On a long hold the effective rate can pass 50%.

Because it requires a PFIC Annual Information Statement from the fund, showing your share of its earnings computed under US tax principles. Indian asset managers do not produce these — they have no reason to, since almost none of their investors are American. Without that statement the election cannot be made, however willing you are. This is the single biggest practical difference between Indian funds and some European ones, where managers do publish the statement.

It is the realistic fallback where available. You pay tax annually on the increase in value, at ordinary rates, and the interest charge disappears. It requires the holding to be marketable stock. For an Indian ETF traded on NSE or BSE that is a reasonable position. For an open-ended scheme that merely redeems at NAV, practitioners disagree, which is why the registry marks it contested rather than available.

No. The folio designation is an Indian regulatory matter. US tax looks at what you own, not how the Indian registrar has labelled it. An NRE-funded, NRI-designated equity scheme is a PFIC in exactly the same way as any other.

Possibly. Dividends and distributions can be excess distributions in their own right if they exceed 125% of the average of the previous three years. And the filing obligation on Form 8621 can arise on value alone. But the larger issue is that the liability accumulates silently while you hold, and only becomes visible when you eventually sell.

It is the annual PFIC return, filed once per fund per year — not once per portfolio. Someone holding twelve schemes files twelve forms. The IRS itself estimates around forty hours of work per form, and preparers commonly charge a few hundred dollars each. The compliance cost alone frequently exceeds the returns on a modest holding.

There is a de minimis exception. Broadly, no Form 8621 is required where the total value of all your PFIC holdings stays under $25,000, or $50,000 filing jointly, provided you have no excess distribution, no disposition gain and no election in force. Thresholds are lower for funds held indirectly through another fund. This exception removes the filing, not the underlying tax treatment.

No. The treaty allocates taxing rights and relieves double taxation on income; it does not disapply the PFIC regime. You may still credit Indian tax paid against US tax on the same income, but the character of the income, the punitive rate and the interest charge all survive the treaty intact.

The deduction is an Indian benefit with no US counterpart, so it saves you nothing on the American side while the PFIC exposure builds. The three-year lock-in then prevents you exiting once you understand the position. Of all the categories, ELSS is the one where the mismatch between Indian and US treatment is starkest.

Neither is a PFIC, but neither is safe. India exempts PPF interest; the United States does not, and the treaty does not extend to it. The prevailing view taxes the annual accrual in the US as it arises, and there may be foreign trust reporting on Forms 3520 and 3520-A. Practitioners hold different views here, which is why the registry marks these entries uncertain.

Genuinely unsettled. There is no authoritative guidance. Some advisers treat it as a foreign grantor trust with Form 3520 reporting, some as a pension falling outside treaty protection, some as a wrapper holding PFICs at fund level. The registry records the disagreement rather than manufacturing an answer, because anyone claiming certainty here is overstating what is known.

Broadly three, and none is free. Continue and accept the section 1291 treatment plus annual filings. Make a mark-to-market election where the holding supports one, which stops the interest charge accruing from that point. Or exit, take the section 1291 hit once, and rebuild the exposure through instruments outside the regime. Which is least bad depends on your holding period, size and bracket, and this is a question for a US-qualified CPA rather than a website.

No, and it is worth resisting the reflex. Selling crystallises the full section 1291 charge immediately, including all the accrued interest. For someone close to giving up US tax residence, or holding a small position, waiting may cost less. The calculation is specific to your facts.

Hold Indian shares directly, or use a US-listed India ETF such as the broad-market or small-cap funds available on American exchanges. Those are US regulated investment companies: ordinary capital gains treatment, a Form 1099 from your broker, and no Form 8621. You give up the ability to buy specific Indian schemes, and tracking will differ from a domestic index fund.

Because the people selling Indian mutual funds are regulated in India, are not qualified in US tax, and have no obligation to raise it. Nothing about a PFIC is disclosed in a scheme information document, and no Indian platform asks whether you are a US person for this purpose. The gap is structural rather than deliberate, which is precisely why publishing an open registry is worth doing.

It carries a version number, an effective date and a changelog. Entries are reviewed twice a year or sooner if guidance changes, corrections are recorded in the changelog rather than made silently, and the whole table can be copied as JSON under a CC BY 4.0 licence. If you think an entry is wrong, say so — a standard is only useful if it can be argued with.

No. It is a published classification of product categories with the reasoning stated, so that it can be checked. Your own position depends on your residence history, holding periods, elections already made and amounts involved. Anyone holding Indian pooled investments while subject to US tax should work with a CPA who handles PFICs regularly — it is a specialism, and general preparers often miss it entirely.