EPF, PPF and NPS on a US Tax Return
This is the hardest topic in India-US filing and the one where confident answers should worry you most. Half of it has a clear answer that almost nobody uses. The other half does not have one, and we will show you the positions instead of picking.
The short answer
Reporting and taxing are different questions with different answers. Reporting: the balances are disclosable, and there is a named exception from the foreign-trust forms that most people never claim. Taxing: genuinely unsettled. The treaty has no article that plainly defers the annual accretion, so positions differ — and we set them out rather than pick one.
What the three schemes are
These three get lumped together as “Indian retirement accounts” and then given one answer, which is the first mistake. For US purposes they are structurally different in ways that change the analysis, so it is worth being precise about what each one actually is before asking what the US does with it.
| Scheme | What it is | Return | Why it matters here |
|---|---|---|---|
| EPFEmployees’ Provident Fund | Statutory workplace scheme, administered by a government bodyFunded by: Employee and employer contributions out of salary | A declared rate of interest, credited annually | The employer contribution and the vesting question make this the most employer-plan-like of the three, which is why one of the competing positions reaches for the nonexempt employees’ trust rules. |
| PPFPublic Provident Fund | Voluntary government savings scheme, opened at a bank or post officeFunded by: Your own money, from any source, up to an annual cap | A declared rate of interest, credited annually | No employer anywhere in the picture, so the employees’ trust arguments do not reach it. If it is a trust at all, it is one you funded yourself — which is what pulls the grantor trust rules into view. |
| NPSNational Pension System | Regulated pension scheme with appointed fund managersFunded by: Your own contributions, and an employer contribution in some cases | Market-linked, depending on the schemes your money is invested in | The awkward one. Because the return comes from underlying investment schemes rather than a declared rate, it raises a look-through question that neither EPF nor PPF raises. |
The one thing all three share is the thing that causes the trouble: each is tax-favoured in India and none of them is a US-qualified plan. India’s decision not to tax the build-up is an Indian decision that binds India and nobody else, and there is no US provision that mirrors it.
Two questions, two very different answers
Almost every argument about Indian provident funds is really two arguments wearing one coat. Separating them is most of the value on this page.
Do I have to disclose it? This is largely answerable. There are three separate disclosure regimes, and for two of them the answer for these schemes is a fairly settled yes. The third — the foreign trust regime — is the one with an exception in it, and that is the section worth your attention.
Do I have to pay tax on it, and when? This is not answerable with confidence. Nobody disputes that the money is taxable eventually — no US rule exempts it. What is disputed is the timing: whether the interest credited to your account each year is income to you in that year, even though you cannot draw it, or whether tax waits until the money comes out.
We have said on four other pages of this site that the second question is unsettled and declined to state a position. This page is where we keep that promise properly, by showing you the actual positions and what is wrong with each of them.
The third reporting question nobody asks
Most people who look into this find the FBAR, then find Form 8938, conclude they have covered the disclosure side, and stop. There is a third regime, and of the three it carries the heaviest consequences for getting it wrong.
If a foreign arrangement is a foreign trust, an entirely separate set of obligations attaches: Form 3520 for transfers to it and distributions from it, and Form 3520-A, which is a return of the trust that a US owner has to ensure gets filed. These are not variations on Form 8938. They are a different regime with its own deadlines and its own penalty provisions, and the penalties are calculated on amounts rather than being flat.
Form 3520-A is due before your tax return. It is due the fifteenth day of the third month after the end of the trust’s tax year — 15 March for a calendar-year trust, a month before your Form 1040. People who discover this obligation in April have already missed it. That timing alone is a reason to work out whether the regime applies to you before the season starts, not during it.
So the question that matters is whether your EPF, PPF or NPS is a foreign trust for these purposes. That is genuinely arguable, and we come to it below. But there is a much better route than arguing it, and it is the next section: for many people the question does not have to be answered at all, because a named exception takes the arrangement out of the reporting regime regardless.
The exception most people never claim
The IRS has provided express relief from foreign trust information reporting for eligible individuals holding certain tax-favoured foreign retirement and savings arrangements. It is not obscure — it is listed among the exceptions in the Form 3520 instructions — but it is routinely missed, and it is exactly the kind of arrangement Indian provident funds are.
There are currently two versions of it, and knowing that there are two is the practical point:
- Rev. Proc. 2020-17, which introduced the exemption for applicable tax-favored foreign trusts and has been available since 2020.
- Proposed regulations under section 6048, published in May 2024, which carry the exception forward in a broader form. They are still proposed, and the Form 3520 instructions expressly permit you to rely on them for tax years ending after 8 May 2024 until final regulations take effect.
The newer version is not a tidy-up. According to the preamble’s own account of what changed, it was modified in three respects that all happen to matter for Indian schemes.
| What the proposed rules changed | Why it matters here |
|---|---|
| Higher contribution limitation thresholds | The relief has always been conditional on the scheme limiting contributions. Raising the threshold widens the gate — which matters most for an employer scheme like EPF at higher salary levels, where contributions are larger. |
| Limited contributions of unearned income permitted | Directly relevant to PPF. You can fund a PPF account from any money you have, not only out of earnings, so a condition framed around earned income is a poor fit. The proposed rules address exactly that. |
| A new value-based de minimis savings trust category | Relief for a scheme that fits neither named category but whose value is under a threshold. This is the route worth examining for an arrangement that is hard to classify — which is the recurring problem with NPS. |
Two conditions on all of this, and both are easy to miss. First, the relief is conditional throughout. The arrangement has to be established under the foreign country’s law to operate exclusively or almost exclusively to provide retirement benefits, and it has to satisfy further requirements about contribution limits or value thresholds, conditions for withdrawal, and information reporting to the local tax authorities. You also have to be an eligible individual. Those conditions are the entire exercise, and we deliberately do not print threshold figures here — they are the thing the proposed rules changed, and they have to be read out of the current text rather than taken from an article.
Relying on the proposed regulations is closer to an election than a choice. The instructions condition reliance on you — and all related persons — applying the proposed regulations in their entirety and consistently for every tax year from the first year you rely on them until the final regulations take effect. You cannot take the helpful parts for one year and revert the next. That makes it a decision to take deliberately, with a note on file recording when reliance started.
What that relief does not do
This is where the good news stops, and being clear about it is more useful than the relief itself, because the alternative is a false sense of having finished.
It does not relieve any other reporting. The IRS says this in terms: these exemptions from foreign trust information reporting do not affect any other reporting obligations. So a scheme squarely inside the exception is still an FBAR item and generally still a Form 8938 item.
In fact the relief is partly premised on that. Among the reasons Treasury gave for granting the exception is that US individuals with an interest in these arrangements may be separately required to report information about them under the FATCA rules. The foreign trust forms were relieved because the information arrives by another route — so treating the exception as blanket relief inverts its logic.
And it does not touch the tax question at all. This is the single most important sentence on the page. The exception is relief from information reporting. It says nothing about whether the annual accretion in your PPF account is taxable income to you this year. Claiming the exception correctly and still having an unresolved income question is the normal outcome, not a contradiction.
The taxation question, and the four positions
Here is the part with no clean answer. The question is narrow and specific: is the interest or growth credited to the account each year income to you in that year? Not whether it is ever taxable — it is — but when.
The reason there is no settled answer is that the outcome depends on how the arrangement is characterised for US purposes, no US authority addresses these specific Indian schemes, and the India-US treaty contains no article that plainly defers the build-up in a foreign pension arrangement. Take that treaty article away and you are left with characterisation arguments, which is where competent advisers genuinely diverge.
Four positions are taken in practice. We are setting them out with what supports and what undercuts each, because the weaknesses are the useful part.
| Position | What it means in practice | What supports it | What undercuts it |
|---|---|---|---|
| A foreign grantor trust you own | The annual interest credited is your income in the year it is credited, whether or not you can touch it. Nothing is deferred. | The grantor trust rules reach a US person who transfers property to a foreign trust that has a US beneficiary. For a self-funded scheme like PPF that description is uncomfortably close to the facts. | It assumes the scheme is a trust in the first place, which is the very question. A statutory government savings account is not obviously a trust arrangement. |
| A non-exempt employees’ trust | Employer contributions come into income as they vest rather than at withdrawal, and the treatment of the fund’s earnings follows a separate set of rules from the grantor trust ones. | This is the regime the Code actually has for a foreign employer-related retirement arrangement that is not a US-qualified plan. The foreign trust reporting rules themselves single out this category of trust, so it is not an exotic argument. | It fits EPF far better than PPF, and not at all for a purely personal scheme. It also brings its own complications for higher-paid employees. |
| Not a trust at all | There is nothing to look through. You hold a claim against a scheme, and income arrives when it is paid to you. | EPF in particular is a statutory scheme run by a government body under its own legislation, which is a poor match for the ordinary meaning of a trust with a grantor and beneficiaries. | No US authority says this about these specific Indian schemes. It is a characterisation argument, and characterisation arguments are exactly what the IRS is entitled to disagree with. |
| The treaty defers it | Nothing is taxed until the money comes out. | It is the intuitive expectation, and some US treaties with other countries do contain an article that recognises the other country’s pension schemes and defers accretion. | The India-US treaty does not contain such an article. This is the weakest of the four and the one most often assumed without being checked. |
Notice what the table does not contain: a recommended answer. That is not evasion, it is the accurate state of the question, and we would rather tell you that than sell you certainty. What we will say is that the positions are not equally strong — the treaty argument is the weakest and the most commonly assumed — and that the right analysis differs between a self-funded PPF and an employer-linked EPF, which is why giving all three schemes one answer is wrong before you even start.
Two things matter more than which position you choose. Be consistent, because switching between years produces a contradictory filing history that is hard to defend and can tax the same money twice. And keep the records that make your position auditable — annual statements, contributions split between you and your employer, interest credited, and a note of the position taken and when. If you are ever asked, the documentation matters as much as the reasoning.
Why NPS is the hardest of the three
Everything above applies more awkwardly to NPS, and it is worth understanding why rather than assuming it travels with the other two.
EPF and PPF credit a declared rate of interest. Once you have taken a view on how the wrapper is characterised, the income is simply interest and there is no further layer. NPS is market-linked: your contributions are invested in schemes run by appointed fund managers, and your return is whatever those investments produce.
That difference raises a second question the other two never reach. If the arrangement is not treated as something that shelters what sits inside it, then the nature of the underlying holdings starts to matter — and Indian pooled investment vehicles are very often Passive Foreign Investment Companies, which carry their own punitive regime and their own per-fund annual form.
Whether that chain of reasoning actually applies to an NPS account is unresolved, and we are not going to pretend to settle it — our PFIC guide deliberately says nothing about NPS for exactly this reason, on the basis that silence is better than a guess. What we will say is that the question exists, that it is materially harder than the EPF and PPF version of the question, and that a substantial NPS balance deserves specific attention rather than being folded in with a provident fund. On the reporting side, note the value-based route in the proposed regulations: an arrangement that is hard to fit into a named category may still fall inside relief on value alone.
There is no US-India social security agreement
This is a different question from income tax, but it is the one people ask next, and unlike most of this page it has a clean and verifiable answer.
The United States maintains a network of bilateral social security agreements, known as totalization agreements, which do two things: they stop a worker paying social security contributions to both countries on the same earnings, and they let periods of coverage in each country be combined so that a divided career still produces a benefit. India is not among the countries the US has such an agreement with. The Social Security Administration publishes the list and India does not appear on it.
Three consequences follow, and all three surprise people:
- No certificate of coverage. The document that exempts a worker from one country’s system does not exist for India, so a cross-border assignment can attract contributions in both systems with no mechanism to relieve it.
- No totalising of credits, in either direction. Indian service does not help you reach the minimum credits for a US benefit, and US coverage does not count on the Indian side.
- Short US assignments still pay in. US law generally covers work performed in the United States regardless of citizenship, residence or how long the stay is, and without an agreement there is no exemption for a temporarily-posted worker.
None of this changes your income tax position. It is worth stating because the intuition that a provident fund is “the Indian equivalent of Social Security” leads people to expect a coordination mechanism that simply is not there — and because the absence of any such arrangement between the two countries is part of the same picture as the treaty’s silence on pension schemes.
Withdrawal, and moving back to India
Everything above is about the accumulation phase. The withdrawal is where the earlier decision comes back, and it is the clearest practical argument for taking a considered position rather than drifting.
The first question is whether you are still a US taxpayer when the money comes out. If you have ceased to be a US tax resident before the withdrawal, it is generally outside the US net — which makes the sequence of a return to India and a withdrawal genuinely consequential rather than administrative.
If you are still a US person when you withdraw, the position you took during accumulation determines what happens. If you had been including the accretion year by year, taxing the full withdrawal would tax the same money twice — and avoiding that depends entirely on being able to show what you already reported. That is the record-keeping point again, and it applies whichever position you took: the value of the documentation does not depend on being right.
There is one more asymmetry worth knowing about. Even where an Indian withdrawal is exempt in India, that exemption gives you no US relief and — because no Indian tax was paid — leaves nothing to claim a foreign tax credit against. It is the same structural trap as NRE interest: the Indian exemption is not a benefit in a US context, it is the removal of your only source of relief.
India’s own treatment of a withdrawal turns on how long the account was held and on your residence status there, and we deliberately quote no Indian provisions, because the Income-tax Act, 2025 replaced the 1961 Act with effect from 1 April 2026 and renumbered almost everything. That side belongs with an Indian adviser working from the current Act.
Where this comes from
The reporting positions are sourced to the Form 3520 and 3520-A instructions, to Rev. Proc. 2020-17, and to the proposed regulations under section 6048 as published in the Federal Register. The social security point is sourced to the Social Security Administration’s own list of agreements. Where the law is unsettled we say so rather than citing something that does not decide it.
- IRS — Instructions for Form 3520, including the exceptions to filing
- IRS — Instructions for Form 3520-A, foreign trust with a US owner
- IRS — About Form 3520
- IRS — Reminder to US owners of a foreign trust (the Form 3520-A deadline)
- Rev. Proc. 2020-17, Internal Revenue Bulletin 2020-12 — exemption for tax-favored foreign trusts
- Proposed regulations under section 6048, Federal Register, 8 May 2024 — proposed section 1.6048-5
- Social Security Administration — US international Social Security (totalization) agreements
- IRS — Publication 519, US Tax Guide for Aliens
Reviewed by Teja K, CPA · last reviewed . General information, not tax advice for your situation. The reporting rules here are mid-change and the tax question is unsettled. Confirm both against current guidance before acting. How we research and review this.
Common questions
Is my Indian EPF taxable in the US?
The honest answer is that it is not settled, and anyone who tells you otherwise in one sentence is overselling their confidence. Two things are clear. The balance is reportable — it goes on an FBAR and is generally a Form 8938 item too. And the money is eventually taxable, because no US provision exempts a foreign retirement fund the way the Indian rules exempt it in India. What is genuinely unresolved is the timing: whether the interest credited each year is your income in that year, or whether it is deferred until you draw the money out. That depends on how the scheme is characterised for US purposes, there are several defensible characterisations, and the India-US treaty contains no article that plainly defers it. This page sets out the competing positions rather than asserting one, because asserting one is not something the authority supports.
Do I have to file Form 3520 for my PPF or EPF account?
Possibly not — and this is the part most people have never looked at, which makes it the most valuable question on the page. Form 3520 and Form 3520-A apply to foreign trusts, and there is a named exception from that reporting for eligible individuals holding certain tax-favored foreign retirement and savings arrangements. It came in with Rev. Proc. 2020-17 and is carried forward, in a more generous form, in proposed regulations you are currently permitted to rely on. The exception is conditional: the scheme has to meet requirements about contribution limits or value, conditions for withdrawal, and information reporting in its own country, and you have to be an eligible individual. Those conditions are the whole exercise and they have to be read against your specific scheme rather than assumed. But the headline is worth knowing: relief may well be available, and the penalty regime for getting foreign trust reporting wrong is severe enough that it is worth checking properly.
Is PPF interest tax-free in the US the way it is in India?
No. The PPF exemption is an Indian rule and it binds India only. There is no matching US exemption, and this is the same trap as NRE interest: the income is not sheltered in the US, and because India took no tax on it there is no foreign tax to claim a credit for either. So it is potentially taxed once at full US rates with no offset. The open question is when, not whether. If the accretion is currently taxable you have income each year with no cash coming in and no Indian tax to credit, which is the worst combination and the reason this is worth getting a considered view on rather than discovering later.
Does the India-US tax treaty protect my provident fund?
Not in the way people hope. Some US treaties with other countries include an article that recognises the other country's pension arrangements and defers tax on the internal build-up until money is drawn. The India-US treaty does not contain such a provision for Indian provident funds. That absence is doing a lot of work on this topic, because it removes the clean answer that a treaty article would otherwise supply, and it is why the characterisation arguments matter at all. It is also frequently assumed rather than checked — including in otherwise careful advice. Our treaty guide covers what the treaty does and does not do.
If my EPF is exempt from Form 3520, do I still file an FBAR?
Yes. These are separate regimes and relief under one does nothing to the other, which the IRS states directly: the exemptions from foreign trust information reporting do not affect any other reporting obligations. It goes further than that — the preamble to the proposed regulations gives as one of its reasons for granting the exception that US individuals with an interest in these arrangements may be separately required to report them under the FATCA rules. In other words the relief is partly premised on you still reporting the asset elsewhere. So a scheme that is fully outside Form 3520 is still an FBAR item and generally a Form 8938 item. Conflating the three is the most common error on this topic.
Is my NPS account a PFIC?
We are not going to give you a yes or a no, because there is not a defensible one to give. Here is what makes NPS different from the other two, which is the useful part. EPF and PPF credit a declared rate of interest, so once you have decided how the wrapper is characterised there is no second layer to worry about. NPS is market-linked: your money sits in schemes managed by appointed fund managers. That raises a look-through question — if the arrangement is not treated as something that shelters what is inside it, the next question is what the underlying holdings are, and Indian pooled investment vehicles are very often Passive Foreign Investment Companies. Whether that chain of reasoning applies to an NPS account is unresolved, and our PFIC guide deliberately does not cover NPS for that reason. What we would say is that the question exists, that it is materially harder than the EPF and PPF version, and that a large NPS balance is worth looking at specifically.
I have had a PPF account for years and never reported it. What now?
It is a common position and usually a fixable one, but the order of operations matters. First establish which years you were actually a US tax resident, because nothing before that is in scope. Then separate the three obligations — the FBAR, the Form 8938 question and the foreign trust question — because the answers can differ and the remedies differ too. The foreign trust reporting question is the one to look at first, not because it is most likely to apply but because its penalty regime is the harshest of the three, and because if the exception applies then a problem you were worried about simply is not there. Then take a considered position on the income and apply it consistently. There are established routes for bringing unreported foreign accounts and assets up to date, and which one fits depends on the facts and on whether the failure was non-willful. This is worth advice before you file anything, because a first filing that takes an unconsidered position is harder to fix than no filing.
Do my Indian EPF years count towards US Social Security?
No. The United States has a network of Social Security agreements, often called totalization agreements, that eliminate double social-security contributions and let a worker combine credits earned in both countries. India is not one of the countries the US has such an agreement with — the Social Security Administration publishes the list, and India does not appear on it. Two practical consequences. Your Indian EPF and pension-scheme service does not help you reach the minimum US credits for a US benefit, and your US coverage does not count on the Indian side either. And there is no certificate of coverage available, so an assignment between the two countries can attract contributions in both systems with no mechanism to relieve it. This is a social-security question rather than an income tax one, but it is the natural second question and the answer is a clear no.
What happens when I withdraw my EPF after moving back to India?
It depends on whether you are still a US taxpayer at that point, and on what position you took while it was accumulating — which is why the position is worth deciding deliberately rather than by default. If you have ceased to be a US tax resident before the withdrawal, the withdrawal is generally outside the US net. If you are still a US person, the withdrawal is a US event, and here is where the earlier position comes back: if you had been including the accretion each year, then including the whole withdrawal again would tax the same money twice, and you need the records to show what you already reported. That record-keeping is the practical reason to pick a position and document it, quite apart from which position is right. India's own treatment of the withdrawal turns on its rules about how long the account was held and your residence status, which is a question for an Indian adviser.
Want a considered position on your provident fund?
On a question this unsettled, the value is in a reasoned position you can defend and apply consistently — plus checking whether the reporting relief takes the harshest regime off the table entirely. We will tell you where the uncertainty sits.