Quick summary
For US tax residents, interest from Indian fixed deposits fully taxable in US, regardless of Indian treatment.
| Account | India Tax | US Tax |
|---|---|---|
| Resident FD | Slab rate, TDS @10% | Fully taxable (if US resident) |
| NRO FD | Slab rate, TDS @30.9% | Fully taxable, FTC available |
| NRE FD | Exempt (Section 10(4)(ii)) | Fully taxable, no FTC |
| FCNR FD | Exempt (Section 10(4)(ii)) | Fully taxable, no FTC |
Accrual vs receipt — when to report?
US tax requires accrual basis for most individuals. For multi-year FDs:
- Interest accrued during year is taxable in that year, even if paid at maturity
- Bank's annual interest statement (Form 16A) helps determine accrued amount
If on cash basis (rare for individuals), report only interest actually credited.
Reinvested interest (cumulative FDs)
Reinvested interest still taxable in year of accrual. Cumulative FDs don't defer US tax.
FX rate
For accrual filers: year-average rate (~₹83/$ for 2024). For cash filers: transaction-date rate.
Be consistent year to year.
TDS and FTC
NRO TDS at 31.2% creates FTC on Form 1116. NRE/FCNR no TDS so no FTC — pure US tax.
Resident FD as NRI
If opened FD while Indian resident and didn't convert to NRO after becoming NRI, technically FEMA violation. For tax:
- India taxes slab rates, TDS @10%
- US taxes same way as any FD
- FTC available for 10% Indian tax
Best practice: Re-designate Resident FDs to NRO upon becoming NRI.
FBAR and Form 8938
All Indian FDs in FBAR and Form 8938 aggregation. Highest balance matters for FBAR.
Common FD mistakes for US persons
- Assuming NRE/FCNR FD interest is US-tax-free
- Reporting only matured FDs (forgetting accrual)
- Using current FX rate for prior-year interest
- Missing FTC on NRO FD interest
- Not aggregating all FDs across banks for FBAR
Planning tip
High-bracket US person:
- Avoid NRE/FCNR FDs (no FTC = pure US tax)
- Prefer NRO FDs (FTC offsets US tax)
- Consider US-domiciled equivalents (Treasury bills, CDs)
Low-bracket US person:
- NRE/FCNR may be net-better — no Indian tax friction even though full US tax
Senior citizen / women's FDs: Higher Indian rates for seniors/women don't change US treatment — still taxable interest on Schedule B.
Explore our complete US Tax Return Guide to understand refunds, filing rules, and IRS procedures for NRIs.