US Tax Filings When You Own an Indian Company: Form 5471, FBAR and CFC Rules

If you are a US person and you own an Indian company, you probably have three separate US filings to think about: Form 5471 for an Indian subsidiary, the FBAR for any Indian bank accounts, and the calculations that flow from the controlled foreign corporation (CFC) rules. Each has its own trigger, its own due date and its own penalty. Missing one does not cancel the others.

This guide explains how the three fit together, what changed for 2026, and what to do in what order. It is written for US companies and US-resident individuals who hold shares in an Indian private limited company, and who want to avoid penalties that are charged even when no tax is owed. For the wider picture of your US reporting, see our US tax filings service.

First, Work Out Where You Sit

The rules all start from ownership, so settle that first.

A US person includes US citizens, green card holders, people who meet the substantial presence test, and US companies, partnerships, trusts and estates. A US shareholder of a foreign corporation is a US person who owns 10% or more of its voting power or value, counting certain indirect and family ownership. A foreign corporation is a controlled foreign corporation when US shareholders together own more than 50% of its vote or value.

A US parent that owns 100% of an Indian subsidiary is therefore the clearest case: the subsidiary is a CFC and the parent is its US shareholder. But the rules also reach individual founders, co-owners and families who each hold a smaller percentage, so test the numbers carefully, including shares held through other entities.

If you are still setting up the Indian business, our India incorporation services can help you plan the share structure with the US reporting in mind from the start.

The CFC Rules for an Indian Company

The CFC rules for an Indian company matter because they can bring the company's income into your US tax return before it is paid out. Two regimes do the work.

• Subpart F. This covers certain passive and mobile income, such as interest, dividends, royalties and some related-party service or sales income. If the Indian company earns Subpart F income, the US shareholder includes its share in US income for the year, whether or not it is distributed.

• Net CFC tested income (NCTI). This regime was known as GILTI until 2025. The One Big Beautiful Bill Act renamed it for tax years beginning after 31 December 2025 and changed the mechanics. The deduction for qualified business asset investment was removed, the Section 250 deduction for corporate shareholders fell to 40%, and the effective corporate rate rises to about 12.6%. The cap on deemed-paid foreign tax credits moved from 80% to 90%. In plain terms, an Indian company's active operating profits can be pulled into the US shareholder's income even when they are not distributed.

Two features often change the result for Indian companies.

• The high-tax exception- income taxed abroad at a rate above 90% of the US corporate rate, currently about 18.9%, can be excluded by election. Indian corporate tax commonly exceeds that rate, so many Indian companies qualify, but the test is performed on a tax base that differs from Indian accounting, so it needs calculation, not assumption.

• Who the shareholder is- a U.S. corporation generally gets the Section 250 deduction and indirect foreign tax credits. An individual shareholder does not get them automatically, and may consider the Section 962 election to be taxed like a corporation on the inclusion. The choice has trade-offs, so model it before you decide.

Form 5471: What It Reports and Who Files

Form 5471 is the information return for US persons connected to certain foreign corporations. It is separate from any tax calculation. You file it to tell the IRS about the foreign company, even when there is no inclusion and no tax.

The form has five filer categories, and one person can fall into several. They broadly cover US citizens or residents who are officers or directors of a foreign corporation in which a US person acquires a significant stake, US persons who acquire or dispose of a 10% interest, US persons who control the corporation, and US shareholders of a CFC. A US parent holding an Indian subsidiary is typically in the last group.

The form asks for a lot. Expect to provide the company's income statement and balance sheet in US dollars on a US-tax basis, a list of shareholders, details of related-party transactions such as service fees or loans, earnings and profits, and information used for the Subpart F and NCTI calculations. The NCTI calculation itself is reported on Form 8992.

You file the form with your US income tax return, including extensions. For a calendar-year US corporation, that is generally 15 April, or 15 October with an extension.

• The year-end mismatch: Indian companies usually close their books on 31 March, while the US shareholder reports on a calendar year. Your CPA will need to map the Indian figures to the US tax period, which often means a separate US-basis closing and reconciliation. Start this early, because it is the step most likely to delay the return.

• The penalty - Failing to file a complete and timely Form 5471 carries a $10,000 penalty per form per year. If you still have not filed 90 days after IRS notice, a further $10,000 applies for every 30 days, up to $50,000 additional, so the cap is $60,000 per form per year. Criminal penalties exist for willful failure.

FBAR for an Indian Bank Account

The FBAR is a separate obligation, filed with FinCEN, not the IRS, on Form 114. It reports foreign financial accounts, and the FBAR for an Indian bank account is a frequent trap for US persons who kept accounts from earlier years in India.

You must file if you are a US person with a financial interest in, or signature authority over, foreign financial accounts whose combined value exceeded $10,000 at any time during the calendar year. Count every account together, not each one separately. The test uses the highest balance during the year, not the year-end balance.

What counts as an Indian account is broad. It includes savings and current accounts, NRE and NRO accounts, fixed deposits, and certain investment and insurance accounts with a cash value. Signature authority matters as well. If you can sign on the Indian company's bank account, you may be able to report that account, even though the money belongs to the company. A US person who owns more than 50% of a company also has a reportable financial interest in the company's foreign accounts. A few exceptions exist for certain officers and employees, so check them with your adviser.

• Due date - The FBAR is due on 15 April for the previous calendar year, with an automatic extension to 15 October. File it electronically through the FinCEN BSA E-Filing system.

• Penalties - The non-willful penalty is a civil amount per violation, adjusted for inflation each year. Willful violations carry much higher penalties, generally the greater of a large fixed amount or 50% of the account balance, and possible criminal charges. Delay is the usual problem, not intent.

• Form 8938 - If you meet the thresholds, the FATCA statement on Form 8938 is filed with your tax return and covers specified foreign financial assets, including foreign shares. It does not replace the FBAR, and some assets are reported on both.

How the Filings Fit Together

These filings feed each other, so work in order.

1. Close and convert the Indian books. Convert the Indian accounts to a U.S. tax basis in dollars and reconcile the year-end.

2. Calculate earnings and profits and tested income. Determine Subpart F income and NCTI, and test the high-tax exception.

3. Prepare Form 5471 and the related schedules. Include related-party transactions, shareholder details and the income calculations on Form 8992.

4. Compute foreign tax credits. Match Indian income tax paid to the right income categories.

5. File the US return. Attach Form 5471, Form 8992 where it applies, and Form 8938 if you meet the thresholds.

6. File the FBAR separately. Use the FinCEN system by 15 April, or the automatic extension to 15 October.

Do Not Forget the Indian Side

US reporting is only half of the compliance picture. The Indian company has its own obligations, and the numbers have to agree. Capital you sent in is reported under FEMA, and our guide to FEMA compliance explains the framework.

The annual FLA return and share-allotment filings are covered in our RBI reporting guide. If you hold Indian bank accounts for the company or personally, keep the balances and signatory details for each account ready before the filing season, because you need them for the FBAR.

Mistakes That Lead to Penalties

A few errors cause most of the trouble. Owners assume that a small, dormant or loss-making company does not need Form 5471. They treat Form 5471 and the FBAR as the same filing. They forget that signing authority on the company account counts. They use Indian statutory accounts without converting them to a U.S. tax basis. They assume the high-tax exception applies without testing it. And they wait for a notice before filing, when the initial penalty is charged automatically.

The Takeaway

Owning an Indian company brings three US filings with different triggers. Form 5471 follows ownership and reports the company, the FBAR follows your Indian accounts and signing authority, and the CFC rules decide whether you owe US tax on income that has not yet been paid out. The most expensive mistake is assuming that a small or dormant company is exempt. Settle your ownership position first, calendar the due dates, and have one adviser coordinate the Indian and US numbers.

Frequently Asked Questions

1. Does a dormant or loss-making Indian company still need Form 5471?

Yes. The obligation depends on ownership and your status as a US shareholder, not on profits. A dormant company still has to be reported, and the penalty for not filing is the same.

2. I own 100% of the Indian company through my US corporation. Who files Form 5471?

The US corporation, as the US shareholder, files the form with its corporate return. If you also own shares directly or are an officer or director, you may have your own filing duties, so check each category.

3. What if my stake is below 10%?

The 10% threshold applies to most categories, but other categories can still apply, for example, to a US officer or director of a foreign corporation in which US persons acquire a significant interest. Check your role and the company's ownership before concluding there is no filing.

4. Does the FBAR go to the IRS with my return?

No. The FBAR is filed separately with FinCEN through its electronic system, and it is due on 15 April, with an automatic extension to 15 October. Form 8938 is the one that accompanies the tax return.

5. What if I missed filings in earlier years?

File as soon as you can. The IRS has procedures for taxpayers who missed information returns or FBARs, and the best route depends on whether the failure was non-willful. Get advice before filing late, because the choice of route affects penalties.

6. Does being on an H-1B visa make me a US person?

It can. If you meet the substantial presence test, you are treated as a US tax resident, and the CFC and FBAR rules can apply to your Indian holdings. Our guide on whether an H-1B holder can own or direct an Indian company covers the Indian side of that question.