5471 obligations for US persons who own an Indian company

If you are a US citizen, green card holder, or resident alien who owns shares in an Indian Private Limited Company — whether you are an NRI founder, an H-1B professional who started a business back home, or a US-based investor with an Indian subsidiary — you have a US tax reporting obligation that most people discover far too late.

Form 5471 — Information Return of US Persons With Respect to Certain Foreign Corporations — is one of the most complex, most penalised, and most frequently overlooked information returns in the US tax system. Missing it costs a minimum of $10,000 per year, per company. And the IRS penalises automatically, without any notice, as soon as the return is filed late or not at all.

This guide explains who must file, which category applies to Indian company owners, what information is reported, what the Indian-specific compliance intersection looks like, and — critically — what you should be doing before and after India incorporation to avoid a cross-border compliance disaster.

What Is Form 5471 and Why Does India Trigger It?

Form 5471 is an annual information return filed with the IRS by US persons who have certain relationships with foreign corporations — including Indian Private Limited Companies, LLPs (in certain structures), and Indian subsidiaries of US businesses.

The form does not compute tax by itself. It is informational — but it feeds data into the US tax return that can trigger actual tax under the Controlled Foreign Corporation (CFC) rules, Subpart F income provisions, and GILTI (Global Intangible Low-Taxed Income) — now renamed NCTI (Net CFC Tested Income) for tax years beginning after December 31, 2025 under the One Big Beautiful Bill Act signed July 4, 2025.

An Indian Pvt Ltd Company is a foreign corporation for US tax purposes. Every US person who owns 10% or more of an Indian company — directly, indirectly, or constructively — is likely required to file Form 5471. Every US person who is an officer or director of an Indian company in which any US person acquires a 10%+ stake must also file, regardless of their own ownership percentage.

The filing obligation exists even if the Indian company had zero income for the year. Even if it is dormant. Even if the US person received no distributions.

The Five Categories of Form 5471 Filers — Which One Applies to You?

Form 5471 has five categories of filers (with subcategories), each with different filing obligations and schedules. Most Indian company owners fall into Category 4 or Category 5 — but understanding all five is essential.

Category 1 — US Shareholders of Section 965 SFCs

A Category 1 filer is a US shareholder (owning 10%+ of vote or value) of a foreign corporation that was a Section 965 Specified Foreign Corporation (SFC) at any time during the tax year.

This category primarily relates to the transition tax from the 2017 Tax Cuts and Jobs Act and is less commonly triggered for straightforward Indian company ownership. However, if your Indian company has US corporate shareholders that make it an SFC, Category 1 may apply.

Category 2 — US Officers and Directors

A Category 2 filer is a US person who is an officer or director of a foreign corporation in which a US person (not necessarily the officer/director themselves) has acquired 10% or more of the stock.

Indian company context: If you are a US person serving as a director of an Indian Pvt Ltd — even without owning a single share yourself — and another US person owns 10%+ of that company, you are a Category 2 filer. Many NRI professionals serving on the boards of Indian family companies are Category 2 filers without realising it.

Category 2 requires only Schedule O (changes in organisation or reorganisation), making it the least burdensome category — but the penalty for non-filing is identical to all other categories: $10,000 per year.

Category 3 — Certain Acquisitions and Dispositions

A Category 3 filer is a US person who:

• Acquires stock in a foreign corporation that — when combined with existing holdings — brings their total to 10% or more of the voting power or value

• Disposes of stock that reduces their ownership below 10%

• Acquires or disposes of an additional 10% or more in a foreign corporation they already hold

Indian company context: If you invest in an Indian startup and your stake crosses the 10% threshold — even in a secondary transaction — a Category 3 filing is triggered for that year. This is particularly relevant for US-based angel investors or VC funds investing in Indian company formation rounds.

Category 3 requires Schedules B, C, and O.

Category 4 — Control of a Foreign Corporation

A Category 4 filer is a US person who controls a foreign corporation — meaning they own more than 50% of the total voting power or value at any time during the taxable year, even for a single day.

Indian company context: This is the most common category for NRI founders who own a majority stake in their Indian Pvt Ltd. If you are a US person who owns 51%, 60%, 80%, or 100% of an Indian company, you are a Category 4 filer. Control for 30 days or more during the year is sufficient — there is no minimum annual ownership period.

Category 4 requires the most comprehensive filing: Schedules B, C, E, F, G, H, I, M, and O — covering balance sheet, income statement, earnings and profits (E&P), related-party transactions, and more. This is the schedule set that requires actual Indian company financial data translated to USD at IRS-prescribed exchange rates.

Category 5 — US Shareholders of a CFC

A Category 5 filer is a US shareholder (owning 10%+ of vote or value) of a foreign corporation that is a Controlled Foreign Corporation (CFC).

A CFC is a foreign corporation in which US shareholders collectively own more than 50% of the total voting power or value at any time during the corporation's taxable year.

Indian company context: If your Indian Pvt Ltd is owned as follows — 60% by you (US person), 40% by your India-based co-founder — the company is a CFC (>50% US ownership). You are a Category 5 filer. If the ownership is 50% you (US person) / 50% Indian resident, it is not a CFC and Category 5 does not apply.

Category 5 is the most consequential category because it also triggers GILTI (now NCTI) and Subpart F income inclusions on your US tax return.

The CFC Trigger: When Indian Company Income Becomes Taxable in the US

If your Indian company qualifies as a CFC, the US shareholder must include certain types of income in their US tax return — even without receiving any distributions.

Subpart F Income (IRC Section 951)

Subpart F income includes passive income types generated by the CFC: dividends, interest, royalties, rents, gains on sale of property, and certain personal service income. If your Indian company earns these types of income, your pro-rata share is taxable in the US in the year earned — not when distributed.

For Indian IT service companies, consulting firms, and product companies earning active business income, Subpart F is generally less of an issue — active business income in most sectors is not Subpart F. But if your Indian company holds investments or earns passive income, review carefully.

GILTI / NCTI (IRC Section 951A)

GILTI — renamed NCTI (Net CFC Tested Income) for tax years beginning after December 31, 2025 under the One Big Beautiful Bill Act — requires US shareholders owning 10%+ of a CFC to include their share of the CFC's tested income in gross income annually.

Tested income is essentially the CFC's net income above a return on depreciable assets. For most Indian service companies with few tangible assets, nearly all income may be tested income subject to NCTI inclusion.

The effective US tax rate on GILTI/NCTI for individuals can be significant — though the Section 962 election allows individuals to be taxed at the lower corporate rate and use foreign tax credits, reducing the burden substantially. The India-US DTAA (Double Tax Avoidance Agreement) and the Indian corporate tax paid can offset some US liability through foreign tax credits on Form 1116 or Form 1118.

Working with a US CPA who understands both US GILTI rules and Indian corporate tax rates is essential — the interaction between India's 22% domestic corporate tax and GILTI is where meaningful tax planning opportunities exist.

Key Schedules Required for Indian Company Owners

For Category 4 and 5 filers with active Indian companies, all of Schedules B, C, E, F, G, H, I, I-1, M, and O are typically required. This is not a simple form — it requires the Indian company's audited financials, a full currency translation exercise, and coordination between the Indian CA preparing the company accounts and the US CPA preparing the 5471.

FBAR and Form 8938: Two Additional Obligations

Form 5471 is not the only US reporting obligation triggered by owning an Indian company. Two more forms are typically required:

FBAR — FinCEN Form 114

If you have signature authority over the Indian company's bank account — which most founders and directors do — and the aggregate value of all foreign accounts exceeds $10,000 at any point during the year, you must file an FBAR (Foreign Bank Account Report) with FinCEN by April 15 (automatic extension to October 15).

FBAR is filed separately from your tax return through FinCEN's BSA E-Filing System. Non-willful penalties are $10,000 per violation per year. Willful violations carry penalties up to the greater of $100,000 or 50% of the account balance — plus potential criminal charges.

Form 8938 — FATCA Statement of Foreign Financial Assets

Form 8938 is filed with your Form 1040 and reports foreign financial assets above specified thresholds ($50,000 for single US residents; higher thresholds for expats). Ownership of an Indian company typically qualifies as a reportable foreign financial asset.

Penalties for Non-Filing or Late Filing

The IRS penalty structure for Form 5471 is automatic and severe:

These penalties are assessed per foreign corporation per year. If you have owned an Indian company for 5 years without filing, the exposure is $50,000–$300,000 before any interest or FTC reductions.

The Farhy v. Commissioner Tax Court ruling questioned the IRS's authority to administratively assess these penalties — but the IRS continues enforcing them through current procedures, and the outcome of pending appeals is uncertain. Do not rely on Farhy as a reason to defer compliance.

Deadlines: When Is Form 5471 Due?

Form 5471 is filed as an attachment to your Form 1040 — there is no separate standalone filing:

• April 15 — standard due date for US residents

• June 15 — automatic extension for US persons living abroad (but tax is still due April 15)

• October 15 — extended deadline with Form 4868

The Indian company's financial year runs April 1 to March 31. The US tax year runs January 1 to December 31. This mismatch means the Form 5471 uses the Indian company's fiscal year that ends within or with the US shareholder's taxable year — typically the FY ending March 31, 2025 for the 2025 US return.

Currency translation uses the IRS yearly average exchange rate for income statement items and the year-end spot rate for balance sheet items. The IRS publishes these rates annually.

India + US Dual Compliance: What Accorp Handles End-to-End

Owning an Indian company as a US person creates obligations on both sides of the Pacific simultaneously — and they must be coordinated, not managed independently:

Accorp Partners is uniquely positioned to handle both sides. As a CPA (USA) and CA (India) firm, we prepare Form 5471 and coordinate with the Indian company's audited accounts — eliminating the coordination gap that exists when a US CPA and an Indian CA work separately without speaking to each other.

Our services for US persons owning Indian companies include:

• Form 5471 preparation — all categories and schedules, including GILTI/NCTI Schedule I-1 and Schedule M related-party transactions

• India company incorporation — company formation in India for US-based founders, including SPICe+, FC-GPR, and resident director arrangement

• Annual Indian statutory compliance — AOC-4, MGT-7, income tax return, FLA return

• FEMA compliance — FC-GPR (at investment), FLA (annual), FC-TRS (on equity transfers)

• Transfer pricing documentation — for intercompany transactions between Indian company and US parent

• FBAR and Form 8938 — coordinated with Form 5471 for consistent foreign asset reporting

• Section 962 election analysis — modelling whether individual GILTI taxation at corporate rates reduces your US tax liability

Whether you are just a US person or have been filing (or not filing) for years, our dual-jurisdiction expertise ensures your India and US compliance are aligned, accurate, and defensible.

Looking to register a company in India? Visit our India Incorporation Services page for expert guidance.