India

The Employees' Provident Fund runs under the Code on Social Security, 2020, in force from 21 November 2025,¹ and the Employees' Provident Funds Scheme, 2026, which replaced the 1952 scheme on its publication in the Gazette dated 29 June 2026.² The employer pays 12% of wages, or 10% in establishments the government notifies, and the employee pays an equal amount, deducted from wages.^3,4 Both are worked out on wages up to a ceiling the government sets, unless employee and employer jointly opt to contribute on more.^5,6 An employee may also choose to pay in more, up to their wages after permitted deductions.^7,8

For a member of the pension scheme, part of the employer's share, eight and one-third percent of wages up to the wage ceiling, goes to the Employees' Pension Scheme, which has its own block below;^9,10 someone who joins with wages above the ceiling is not a member of that scheme.¹¹ Some establishments are exempted and run their own provident funds instead; the analysis below applies to them too, though their rules can differ.¹²

A foreign trust, on our reading.

The Provident Fund vests in, and is administered by, the Central Board of Trustees,¹³ and each member has an account, credited with interest at a rate the Central Government sets in consultation with the Board.¹⁴ That fits the U.S. test for a trust: trustees holding property to protect or conserve it for the beneficiaries.¹⁵ No IRS guidance addresses the EPF, but IRS counsel treated Singapore's Central Provident Fund, a government fund held in trust with an account for each employee, as a §402(b) employees' trust.¹⁶ A fund governed by Indian law and run in India meets neither test for a domestic trust, so it is foreign.^17,18

We read it as a §402(b) employees' trust; your compulsory share counts as your employer's.

No IRS ruling addresses the EPF, though the IRS has ruled privately that a similar foreign fund, with mandatory employer contributions and personal accounts, is a §402(b) trust.¹⁹ We read the EPF as a §402(b) employees' trust: the employer must pay in for each employee,²⁰ and a trust created outside the United States cannot be exempt under U.S. §501(a).²¹ §402(d) treats a foreign trust as exempt only if it would otherwise qualify,²² and on our reading nothing suggests this plan meets §401(a).

On that reading, employer contributions are U.S. income to you in the year they are paid, to the extent they are vested,^23,24 and the foreign earned income exclusion cannot cover them.²⁵ Your compulsory share is deducted from your wages because the law requires it,⁴ and the IRS's reading of a similar fund treats contributions like that as the employer's,²⁶ so you are not treated as owner of the part the employer's and your compulsory contributions fund.²⁷ If your wages were above the ceiling when you joined, you became a member by a joint written choice with your employer, and you stay one until you withdraw your balance.^28,6,29 Under the §401(k) rules, which apply here only as an analogy, a one-time irrevocable choice made on first becoming eligible is not a cash or deferred election,³⁰ so we count your compulsory share as your employer's in that case too; a joint choice made later, after first becoming a member, fits the analogy less well, and this is not settled. The argument the other way is that an amount contributed at an employee's election is the employee's.³¹

Contributions you choose to make, above the compulsory rate or on wages above the ceiling, are your own, taxed as pay,^32,8,33 and once they exceed the contributions counted as your employer's, you are treated as owner of the part they fund, if the grantor trust rules are otherwise met.³⁴ The employer's share that goes to the pension scheme isn't counted as your employer's, because it is paid to the Pension Fund, not into your account;¹⁰ leaving it out is the cautious course, as it keeps the employer's side smaller, so your own contributions pass it sooner. No contribution to a §402(b) trust is a Part I event.³⁵ Payouts are taxed under §72 when they are paid or made available to you, and an amount you could withdraw just by asking counts as made available,^36,37,38,39 which may reach the balance you can take out in special circumstances each year, though no IRS guidance says so for the EPF.⁴⁰ Payouts stay off Part III if you report them as compensation income,^41,42 unlike payouts from a part you own.⁴³

If you are a highly compensated employee and one reason the fund is not exempt is that it fails the U.S. coverage tests, you include your vested balance, less what has already been taxed to you, in income each year instead.⁴⁴ No IRS guidance says whether the EPF fails those tests.

Rev. Proc. 2020-17: unlikely, since members can now withdraw most of the balance without giving a reason.

Rev. Proc. 2020-17 exempts an eligible individual (one who has filed U.S. returns and reported the fund's income as U.S. law requires)⁴⁵ from Forms 3520 and 3520-A for a retirement trust that meets its conditions.⁴⁶ The EPF meets four of them. It is tax-favored: the Code makes it a recognised provident fund under India's Income-tax Act, 1961,⁴⁷ which kept employer contributions of up to 12% of salary out of the employee's income and excluded the balance paid out after five years' service;^48,49,50 the Income-tax Act, 2025 replaced that Act from 1 April 2026 without, the tax authority says, changing the underlying tax policy.⁵¹ The relief is capped: since 1 April 2021 employer contributions to a provident fund, the NPS, and a superannuation fund above ₹7,50,000 a year have been taxable, and since 1 April 2022 so has interest on your own contributions above ₹2,50,000 a year.^52,53 Contributions come out of wages.^4,54 They are limited by a percentage of earned income: compulsory contributions are a percentage of wages, and voluntary ones may not exceed wages after permitted deductions.^3,8,55 And the employer must pay in for every employee of a covered establishment, other than one whose wages were above the ceiling on joining, who joins only by a joint choice.^56,20,28

The withdrawal condition is likely not met. After 12 months' membership a member may withdraw everything above a minimum balance for illness, education, marriage, or housing, and twice a financial year in “special circumstances”,⁴⁰ for which, the Ministry of Labour says, no reason need be given.⁵⁷ A member may take the whole balance on retiring after 55, on permanent incapacity, on leaving India to settle or work abroad, on retrenchment or voluntary retirement, or after 12 months without covered employment.⁵⁸ An International Worker, an employee holding a passport other than India's, may take the full balance only on retiring after 58 or on permanent incapacity, or on leaving covered employment where a social security agreement applies.^59,60 Rev. Proc. 2020-17 accepts withdrawals for hardship, education, and buying a home,⁶¹ but a withdrawal with no stated reason, leaving the country, and losing a job are not among its examples. Reporting is open too: each member gives the fund their Indian tax number and gets a yearly statement,^62,63 but we found no rule requiring the fund to report members' accounts to India's tax authority each year.⁶⁴ With no IRS guidance on the EPF, Rev. Proc. 2020-17 is unlikely to cover it.

The proposed regulations, which you may rely on now if you apply them in full and consistently with related persons,⁶⁵ have the same withdrawal condition, so their value test, which can stand in for a contribution limit, does not help.^66,67

No deferral, and no treaty relief for a lump-sum payout.

The U.S.–India treaty does not defer U.S. tax on the fund's earnings or exclude contributions. Its private pension article covers pensions and annuities once paid,⁶⁸ and for a U.S. citizen or resident the saving clause lets the United States tax as if the treaty did not apply,⁶⁹ keeping, among a few others, the rules for social security and other public pensions, for child support, and for relief from double taxation.⁷⁰ An EPF payout is a lump sum, and the treaty counts only periodic payments as pensions; the Technical Explanation treats a lump sum from a pension plan as other income, which the saving clause leaves the United States free to tax.^71,72 The IRS has said of Canadian plans that Forms 3520 and 3520-A still apply even where a treaty defers tax.⁷³ Treasury officials told GAO few treaties address moves between plans,⁷⁴ and this one has no rule on whether a move is taxed. Where a treaty is silent, IRS officials said, there is generally no form of transfer that gets deferral.⁷⁵

Little to file: Part II and Form 3520-A only if your voluntary contributions exceed your employer's and compulsory ones together.

Read as a §402(b) trust: no Part I for any contribution.³⁵ No Part II or Form 3520-A for the part the employer's and your compulsory contributions fund; once your voluntary contributions exceed the contributions counted as your employer's, Part II and Form 3520-A each year for the part they fund.^27,34,76 No Part III for payouts from the employer-funded part that you report as compensation income;⁴¹ payouts from a part you own go on Part III, lines 24 and 27.⁴³ An amount made available to you, as the §402(b) step reads it, is taxed in the year it is made available.³⁶ Money counted as made available in an earlier year and paid out later goes on Part III when it is paid, with a statement naming the year it was counted, whether or not it went on Part III that year: the count was a constructive receipt and the payout is the actual one, and line 24 covers what you receive actually or constructively, whether or not it is taxable; what was taxed when it was made available is basis by then, not compensation income you report, so the compensation exception does not take it off.^77,78,41 On the cautious course, a payout that mixes that money with growth or other money taxed only when it is paid goes on Part III in full, the part you report as compensation income included, since the exception covers a distribution you report as compensation income and part of this one is not.^77,41 No Form 4970: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules, and the income of a part you own is taxed to you each year.^36,79,80

If the fund is not treated as a §402(b) trust, the contributions you make are Part I transfers and you are treated as owner of the part they fund, so Part I, Part II, Form 3520-A, and Part III all apply.^81,82,76,83 Part I also applies at your death as a U.S. citizen or resident, if any part of the fund is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.⁸⁴ Rev. Proc. 2020-17 and the proposed regulations would remove all of these for an eligible individual whose account qualified, but the withdrawal rules make that unlikely.^46,65,57 On our reading the exemption also spares your executor the report of your death, if you were an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^85,86,87 No IRS guidance names executors, and the revenue procedure's scope speaks of the eligible individual who would otherwise report.⁸⁸ FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^89,90

The Employees' Pension Scheme, 2026 replaced the 1995 pension scheme on its publication in the Gazette dated 29 June 2026.⁹¹ Out of the employer's contribution, 8.33% of wages up to the wage ceiling goes to the Pension Fund, and the Central Government adds 1.16% of pay; members pay nothing in themselves.^10,92 Members have no account: after at least 10 years of service the scheme pays a monthly pension by formula, and a member who leaves with less service gets a lump-sum withdrawal benefit from a table.^93,94 The Central Government has the fund valued each year and may change the contribution rates and the benefits.⁹⁵

Not settled: a social insurance program of the Indian government, or a trust like the EPF.

Not settled. On one reading the scheme is a social insurance program of the Indian government rather than a trust: members hold no account, the Central Government pays in and may change the benefits,^92,95 and the U.S. Social Security Administration describes it as India's social insurance pension, separate from the provident fund.⁹⁶ The IRS does not count rights under a foreign government's social security or social insurance program as foreign financial assets for Form 8938.⁹⁷ On the other reading the Pension Fund is a trust like the EPF, since both funds vest in the Central Board of Trustees.^13,15 No IRS guidance addresses the EPS.

If it is part of a §402(b) trust, you pay nothing in, so you own no part of it.

If the scheme is part of a §402(b) employees' trust, your employer's contributions are U.S. income to you when paid, to the extent they are vested,^23,24 and since you pay nothing in yourself, you are not treated as owner of any part of it.^10,27 If it is a social insurance program, §402(b) does not reach it, since §402(b) covers an employer's contributions to an employees' trust.²³

Unlikely to apply, and needed only for the Part III question.

Not needed for Parts I and II, which do not apply on either reading. For the Part III question below, Rev. Proc. 2020-17 is unlikely to help: a member who leaves with less than 10 years' service can take a lump sum,⁹⁴ which is not among the withdrawals it accepts.⁶¹

A monthly pension is likely an Indian social security benefit, taxable only in India; a lump sum is not.

Under the treaty, social security benefits and other public pensions India pays to a U.S. citizen or resident are taxable only in India, and the saving clause does not override that.^98,70 The Technical Explanation's example is a U.S. citizen living in the United States who receives a social security benefit from the Indian government: that payment is exempt from U.S. tax.⁹⁹ The stronger reading is that a monthly EPS pension is such a benefit: the scheme is made under India's Code on Social Security, the Central Government pays into it and can change it, and the SSA treats it as India's social insurance.^91,92,95,96 The other reading is that it is a private pension from an employment-based fund, which the United States may tax.^68,69 It is not settled. A lump-sum withdrawal benefit is not covered either way: the treaty counts only periodic payments as pensions.^71,72 Treaty positions that modify the taxation of pensions or social security are among those for which Form 8833 is waived.¹⁰⁰

No Part I, Part II, Form 3520-A, or Form 4970; Part III only in one case that is not settled.

No Part I: you make no contributions to the scheme,¹⁰ and contributions to a §402(b) trust are not Part I events in any case.³⁵ No Part II or Form 3520-A: on either reading you are not treated as owner of any part of it.^27,76 No Part III if the scheme is a social insurance program, or if you report the pension as compensation income.⁴¹ If the scheme is a trust and you treat a monthly pension as exempt under the treaty, you do not report it as compensation income, so that exception may not apply and Part III could be due; this is not settled.⁸³ If you rely on the proposed regulations, their version of the exception does not count amounts a treaty exempts, so Part III is not due.^101,65 No Form 4970: payouts from a §402(b) trust are taxed under §72, not under the trust distribution rules.^36,79 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^89,90

The National Pension System is a contributory pension system regulated by PFRDA, in which every subscriber has an individual pension account, the Tier I account, under a permanent retirement account number that stays the same across jobs.^102,103 Central Government servants appointed on or after 1 January 2004 are covered compulsorily: they pay 10% of their pay, deducted from salary, and the Government pays 14%; they may pay in more.^104,105,106 State governments may extend the system to their own employees.¹⁰⁷ Other employers may adopt it under the Corporate Sector Model by registering with the central recordkeeping agency, and choose whether the employer, the employee, or both pay in.^108,109 The account moves with you between employers and between the Corporate and All Citizen models, and you may also pay in yourself.^110,111 In India your employer's contribution is part of your salary, deductible up to 10% of it, or 14% for a government employer or under the new tax regime.^112,113

Since 1 April 2025 Central Government subscribers may choose the Unified Pension Scheme, under which part of the Government's contribution goes to a pool with no individual accounts and the individual account passes to the pool at retirement for an assured payout.¹¹⁴ This guide does not cover it.

A foreign trust, on our reading.

NPS Trust was set up under the Indian Trusts Act, 1882, is the registered owner of the system's assets, and holds them for the subscribers, who remain their beneficial owners;^115,116,117 the PFRDA Act describes it as the Board of Trustees who hold subscribers' assets for their benefit,¹¹⁸ which fits the U.S. test for a trust.¹⁵ No IRS guidance addresses the NPS. Governed by Indian law and run in India, it meets neither test for a domestic trust.^17,18

A Tier I account an employer pays into reads as a §402(b) trust; the Government's compulsory 10% counts as the employer's.

No IRS ruling addresses the NPS. IRS counsel treated Singapore's Central Provident Fund, a national fund held in trust with an account for each employee, as a §402(b) employees' trust,¹⁶ and the IRS has ruled privately that a foreign fund that employers use for their retirement plans, and that individuals may also join, is a §402(b) trust for the members whose employer pays in more than they do.¹¹⁹ §402(b) reaches an employer's contributions to an employees' trust,²³ and nothing in it requires the employer to have set the trust up. We read a Tier I account your employer pays into as part of a §402(b) employees' trust: the Government model is the Government's own pension arrangement for its staff,¹⁰⁴ a corporate employer adopts NPS for its employees and decides what it pays,^108,109 and a trust created outside the United States cannot be exempt under U.S. §501(a).²¹ §402(d) treats a foreign trust as exempt only if it would otherwise qualify,²² and on our reading nothing suggests this plan meets §401(a). This is not settled. The other reading is that the system is one national scheme of individual accounts, into which your employer only pays part of your salary, as Indian law treats it;^120,112 you would then own the whole account, and every contribution, your employer's included, would be a Part I transfer.^82,81 No IRS guidance supports that reading.

On our reading, your employer's contributions are U.S. income to you in the year they are paid, to the extent they are vested,^23,24 and the foreign earned income exclusion cannot cover them.²⁵ NPS says they cannot be forfeited,¹²¹ and a government employer's right to hold back its contributions to recover a loss proved against you in proceedings is a condition for cause, which does not delay vesting.^122,123 You are not treated as owner of the part they fund.²⁷ For the Government model, your 10% is required and deducted from your salary,¹⁰⁵ and the IRS's reading of a similar fund treats contributions like that as the employer's,²⁶ so they count on your employer's side. Contributions you choose to make are your own, taxed as pay.³³ In the Corporate model the structure is chosen and an employee may pay nothing,¹⁰⁹ so we count your payroll contributions as your own, the cautious course; if your employer's terms make them compulsory, they may count as your employer's instead, which is not settled. Once your own contributions exceed your employer's, with the Government model's compulsory share on your employer's side, you are treated as owner of the part they fund, if the grantor trust rules are otherwise met.³⁴ At 10% each, yours never exceed your employer's unless you add more. No contribution to a §402(b) trust is a Part I event, your own included.³⁵

Payouts are taxed under §72 when they are paid or made available to you,^36,37 and an amount you could withdraw just by asking counts as made available,^38,39 which may reach the share you could take as a lump sum once you are entitled to exit, even if you defer it; no IRS guidance says so for the NPS.¹²⁴ The part of your account that buys an annuity at exit is a payout too, worth the contract's whole value when it is bought, though India does not tax it then.^125,126 Payouts from the employer-funded part stay off Part III if you report them as compensation income,^41,42 unlike payouts from a part you own.⁴³

If you are a highly compensated employee and one reason the trust is not exempt is that the plan fails the U.S. coverage tests, you include your vested balance, less what has already been taxed to you, in income each year instead.⁴⁴ We found no rule requiring a corporate employer to offer NPS to all its staff, so this can matter; no IRS guidance says whether it applies.

Unlikely under Rev. Proc. 2020-17 and the proposed rules: contributions are unlimited; some withdrawal reasons aren't accepted.

Rev. Proc. 2020-17 is unlikely to cover the account. It is tax-favored,^113,50 but contributions are not limited to earnings or capped: you may pay in any amount, at any time, through any point of presence,^{127,111,54,55} and partial withdrawals are allowed for a child's marriage, which is not among the withdrawals it accepts.^128,61 The proposed regulations need contributions only “generally” from earned income and let a value test stand in for a contribution limit,^129,67,65 but they have the same withdrawal condition,⁶⁶ so they are unlikely to cover it either.

No deferral, and no effect on reporting.

Same as the EPF: no deferral, and no effect on reporting.^68,69,73

No Part I. Part II and Form 3520-A only once your own contributions exceed your employer's.

Read as a §402(b) trust: no Part I for any contribution.³⁵ No Part II or Form 3520-A for the part your employer's contributions fund, and, for the Government model, your compulsory ones; once your own contributions exceed those, Part II and Form 3520-A each year for the part they fund.^27,34,76 If the trust does not file Form 3520-A, you attach a substitute built from your statement of transaction.^130,131 No Part III for payouts from the employer-funded part that you report as compensation income;⁴¹ payouts from a part you own, including its share of an annuity bought at exit, go on Part III, lines 24 and 27.⁴³ An amount made available to you, as the §402(b) step reads it, is taxed in the year it is made available.³⁶ Money counted as made available in an earlier year and paid out later goes on Part III when it is paid, with a statement naming the year it was counted, whether or not it went on Part III that year: the count was a constructive receipt and the payout is the actual one, and line 24 covers what you receive actually or constructively, whether or not it is taxable; what was taxed when it was made available is basis by then, not compensation income you report, so the compensation exception does not take it off.^77,78,41 On the cautious course, a payout that mixes that money with growth or other money taxed only when it is paid goes on Part III in full, the part you report as compensation income included, since the exception covers a distribution you report as compensation income and part of this one is not.^77,41 No Form 4970: payouts from a §402(b) trust are taxed under §72, and the income of a part you own is taxed to you each year.^36,79,80

If the account is not treated as a §402(b) trust, you own all of it and every contribution, your employer's included, is a Part I transfer, so Part I, Part II, Form 3520-A, and Part III all apply.^81,82,76,83 Part I also applies at your death as a U.S. citizen or resident, if any part of the account is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.⁸⁴ An account no employer has ever paid into is in the block for individual plans. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^89,90

Any Indian citizen, resident or not, or Overseas Citizen of India aged 18 to 85 may open an NPS account voluntarily, under the All Citizen Model, and pay in any amount at any time.^132,133,127 A subscriber with a Tier I account may also open a Tier II account, an optional investment account with no tax benefit that can be withdrawn from at any time; NRIs and OCIs may not open one.^134,135 If an employer later pays into your Tier I account, for example after you join a corporate employer and move the account to the Corporate model, it is read as in the block for employer plans from then on.¹¹⁰

A foreign trust, on our reading; for Tier II, not settled.

A foreign trust, on our reading, for the same reasons as an account an employer pays into.^{115,116,118,15} A Tier II account is less clear. It is held by the same trust, but it is an investment account with no lock-in,¹³⁵ and an investment trust whose manager can vary its investments is not classified as a trust;¹³⁶ the retirement purpose and limits on withdrawals that support reading the Tier I account as a trust are missing. Whether a Tier II account is a trust, or an interest in a business entity to which the PFIC rules may apply, is not settled. The cautious course for Form 3520 is to report it as a trust you own; this guide does not decide the PFIC question.

Does not apply where no employer pays in.

§402(b) reaches only an employer's contributions to an employees' trust,²³ so it does not apply to an account no employer has paid into, and the IRS's private ruling on a similar fund covered only members whose employer paid in more than they did.¹¹⁹ We take the cautious course of treating the account as yours from the first contribution: no IRS guidance says whether an NPS subscriber with no employer money is within an employees' trust.

Unlikely under Rev. Proc. 2020-17 and the proposed rules: joining turns on citizenship, not earnings; Tier II has no tax benefit.

Rev. Proc. 2020-17 needs contributions only from earned income,⁵⁴ while the NPS lets any eligible citizen subscribe voluntarily, on conditions of citizenship and age, not earnings,¹³² so it is unlikely to cover the NPS. Since 16 December 2025 a subscriber who joined voluntarily may also leave after 15 years in the system, at any age, using only 20% of the balance to buy an annuity,^124,137 which is not a retirement age, disability, or death.⁶¹ The proposed regulations need contributions only “generally” from earned income and let a value test stand in for a contribution limit,^129,67,65 but they have the same withdrawal condition,⁶⁶ so they are unlikely to cover the NPS either. A Tier II account has no tax benefit, so it is not tax-favored.^135,50

No deferral, and no effect on reporting.

Same as the EPF: no deferral, and no effect on reporting.^68,69,73

Full reporting: Part I for each contribution, Part II and Form 3520-A each year, Part III for payouts.

You are treated as owner of the whole account, including the part funded by contributions made before you became a U.S. person, because its income is held for you,^138,82 so Part II and Form 3520-A are due each year,⁷⁶ and payouts, including an annuity bought at exit, go on Part III.⁸³ Each contribution you make as a U.S. person is a Part I transfer,⁸¹ and one made within 5 years before your U.S. residency started is treated as made on your residency starting date and goes on Part I for that year.¹³⁹ Part I also applies at your death as a U.S. citizen or resident, if any part of the account is then treated as owned by you or is in your gross estate: your executor reports it, whether or not the executor is a U.S. person.⁸⁴ If the trust does not file Form 3520-A, you attach a substitute to your Form 3520.¹³⁰ Report a Tier II account the same way, as an account of its own. No Form 4970: the income of an account you own is taxed to you each year.⁸⁰ An eligible individual whose account qualifies under the proposed regulations files none of these.⁶⁵ On our reading the exemption also spares your executor the report of your death, if you were an eligible individual and the plan qualified: it covers an eligible individual's transactions with, or ownership of, the trust, and an eligible individual can be someone who at any time was a U.S. citizen or resident.^87,140 No IRS guidance names executors. FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^89,90

A PPF account is an account under the Public Provident Fund Scheme, 2019, a government savings scheme made under the Government Savings Promotion Act, 1873.¹⁴¹ An individual opens the account and deposits ₹500 to ₹1.5 lakh a year, interest is credited at the end of each year, and the account may be closed after 15 years.^{142,143,144,145}

Not a trust, on our reading.

The scheme is made under the Government Savings Promotion Act, 1873, which treats the money as a deposit in a government savings bank, with interest at a rate the Central Government sets;^146,147 the scheme gives the account holder an account to deposit into, on which interest is credited, and sets up no trustee to hold the deposits.^142,144 A trust for U.S. purposes needs trustees who take title to property for the beneficiaries,¹⁵ and Indian law describes a trust the same way, as an obligation annexed to the ownership of property for the benefit of another.¹¹⁷ No IRS guidance addresses the PPF.

Does not apply.

§402(b) does not apply: the account holder, not an employer, makes the deposits,¹⁴² and §402(b) reaches only an employer's contributions to an employees' trust.²³

Not needed if it is not a trust.

If the account is not a trust, §6048 does not reach it and no exemption is needed;⁸¹ on that reading it also does not count toward the proposed regulations' value test, which adds up the value of your trusts in India.⁶⁷ If it were treated as one, Rev. Proc. 2020-17 would be unlikely to cover it, because deposits need not come from earned income.^54,142

No deferral.

No treaty provision defers or exempts U.S. tax on PPF interest.⁶⁹

No Form 3520 or 3520-A, on our reading.

On our reading, no Part I, Part II, Form 3520-A, or Part III, and no Form 4970: Form 3520 and Form 3520-A report foreign trusts, and a PPF account is not one.^81,76,83 FBAR (FinCEN Form 114) and Form 8938 are separate, and an exemption from Forms 3520 and 3520-A does not remove them.^89,90

A private trust under the Indian Trusts Act, 1882, set up during someone's life or by their will, in which a trustee holds property for family members.¹¹⁷ If the trustee mainly runs a business for profit rather than holding property for the family, U.S. law may classify the arrangement as a business entity rather than a trust.¹⁴⁸

A foreign trust, unless a U.S. court supervises it and U.S. persons control its substantial decisions.

An ordinary trust where the trustee holds property for the beneficiaries,¹⁵ and a foreign trust where a trustee in India administers it under Indian law, since it then fails the court test, which alone makes it foreign, even where the trustee is a U.S. citizen.^17,18 A trust is domestic only on a day a U.S. court can supervise its administration and U.S. persons control all of its substantial decisions, counting everyone who can make one, not only the trustees.¹⁴⁹ Powers a settlor keeps, or a protector's consent rights, do not on our reading stop it being a trust; they go to who is owner, below, and where a foreign person holds one that is a substantial decision, such as a power to revoke the trust or to replace the trustee, it also keeps the trust foreign, even with a U.S. trustee.^150,151 A bare trust whose trustee only holds title for an adult entitled to the property may not be a trust for U.S. purposes,¹⁵² but that ruling is narrow,¹⁵³ so whether a bare trust is one is not settled, and the cautious course reports it as a trust. A bank or trust company that holds your own investments only to act on your instructions is not that kind of bare trust; it is an account, not a trust.¹⁵²

A U.S. person who funds it is owner when it has a U.S. beneficiary; a foreign settlor only in two narrow cases.

Who is treated as owner decides who files Part II and Form 3520-A. A U.S. person who transfers property to the trust is treated as owner of the part it funds for any year in which the trust has a U.S. beneficiary.⁸² Someone who funds the trust while not a U.S. resident and becomes one within 5 years is treated, for this rule and for Part I, as transferring that part of the trust on the day their U.S. residency starts.¹³⁹ A settlor who is not a U.S. person is treated as owner only if they can revoke the trust alone or with the consent of a related or subordinate party subservient to them, or if only they or their spouse can receive distributions during their life.¹⁵⁴ Otherwise, unless another grantor trust rule makes a U.S. person owner,¹³⁸ no one is owner, and the trust is taxed as a separate, non-grantor trust.¹⁵⁵

A trust has a U.S. beneficiary for the transferor rule if anyone has discretion to pay or benefit any person, unless its terms identify the class who may benefit and none of them is a U.S. person that year,¹⁵⁶ even if nothing is paid to a U.S. person that year;¹⁵⁷ a power to amend the trust to benefit a U.S. person counts, and so does a letter of wishes or other understanding that points to benefiting one, even one that says it is only a suggestion.¹⁵⁸ Where a U.S. person funds the trust, the IRS may treat it as having a U.S. beneficiary unless that person shows it has none.¹⁵⁹ A beneficiary who first became a U.S. person more than 5 years after the transfer is not counted,¹⁶⁰ and a transferor whose trust gains a U.S. beneficiary is taxed that year on the income the trust kept for that part to the end of the year before, as an accumulation distribution with the interest charge.^161,162 A settlor who is not a U.S. person keeps the revocable-trust exception for a year only if they can take the property back alone, or with the consent of a related or subordinate party subservient to them, for at least 183 days of it; a power that needs anyone else's consent, such as an independent trustee's or protector's, does not count.^163,164 Once the exception fails for a year it is lost for good.¹⁶⁵ Separately, a portion already treated as owned under §676, or under §677 other than its life insurance rule, on September 19, 1995 keeps that owner for the property it held that day, for as long as it stays so treated.¹⁶⁶ A U.S. settlor of a trust with no U.S. beneficiary can still be owner under another rule, for example by keeping a power to take the property back,¹⁶⁷ and a U.S. beneficiary who alone can take the property is owner of it.^168,154

When a settlor who was not a U.S. person dies, the revocable-trust and spouse-only exceptions end for that settlor's portion, because the person left with the power, even a surviving spouse, is not its grantor;¹⁶⁹ a U.S. person who alone can take the property, or a U.S. person who funded the trust, can still be owner, and otherwise the portion is taxed as a non-grantor trust.^168,82,155 When a portion stops being owned by a U.S. person, the owner is treated, for the gain rule, as transferring it to a foreign trust that day.¹⁷⁰ At death the gain is excused only if the trust's basis in the property is then reset to its value at death under section 1014(a), as where the owner could still revoke the trust;¹⁷¹ otherwise the owner is treated as transferring it immediately before death and recognizes the gain.¹⁷²

No relief.

The saving clause lets the United States tax its citizens and residents as if the treaty did not apply,⁶⁹ and none of the provisions it spares concerns foreign trust reporting.⁷⁰

Part I for whoever funds it, Part II and Form 3520-A for an owner, Part III for whoever receives a distribution.

A U.S. person who transfers property to the trust files Part I for that year.⁸¹ A transfer to a foreign trust is treated as a sale, and you recognize any gain on what you transfer;¹⁷³ a transfer is not, to the extent anyone is treated as owning the part it funds.¹⁷⁴ Part I also applies on the death of a U.S. citizen or resident who was treated as owner of any part of the trust, or whose gross estate includes part of it, and to property that passes to the trust by reason of a U.S. person's death; the executor reports it, whether or not the executor is a U.S. person.⁸⁴ The gain rule does not apply to property that passes to the trust by reason of a U.S. person's death, if its basis in that property is set under section 1014(a).¹⁷¹ A U.S. owner files Part II and makes sure Form 3520-A is filed, or files a substitute, each year.^76,130 A U.S. beneficiary who receives a distribution files Part III for that year.⁸³ A distribution from a non-grantor trust that carries out income the trust kept in earlier years is an accumulation distribution, taxed with an interest charge on Form 4970.¹⁷⁵ Form 4970 can also apply to a transferor taxed when the trust gains a U.S. beneficiary, as the owner step says.¹⁶² Rev. Proc. 2020-17 does not apply: it covers only retirement trusts and medical, disability, or educational savings trusts.¹⁷⁶

A distribution is any gratuitous transfer from the trust, whether or not it is a grantor trust and whether or not you are named as a beneficiary, including a credit card bill it pays or guarantees and a check written on its account.¹⁷⁷ On the proposed rules, a payment from a company the trust owns to a U.S. person who is a grantor, owner or beneficiary of the trust, or related to one, is treated as a distribution from the trust, unless that person shows it is properly attributable to their own interest in the company.^178,65 A loan of cash or marketable securities, or use of trust property, to you or a related U.S. person goes on Part III whether or not it is taxable;¹⁷⁹ it is treated as a distribution for income tax, except a loan made on a qualified obligation (a written loan in U.S. dollars, for 5 years or less, at an interest rate tied to the federal rate, for which you extend the IRS's time to assess and that you report each year) or use you pay the fair market value for within a reasonable time,^{180,181,182,183} and where a U.S. person funded the trust, the loan instead makes it a grantor trust, and it still goes on Part III.¹⁸⁴

If you are the U.S. owner of the part that pays you, you complete only lines 24 and 27, and the rest of this paragraph does not apply to you.⁴³ Otherwise, with a complete Foreign Grantor Trust Beneficiary Statement you treat a payment as coming from the owner, so a gift from the owner is not your income;¹⁸⁵ without one, the default method applies even to a distribution from a grantor trust.¹⁸⁶ From a non-grantor trust you may use the actual method if you have a Foreign Nongrantor Trust Beneficiary Statement,¹⁸⁷ and without one the default method applies: the part of this year's distributions above 1.25 times the average of the three years before is an accumulation distribution, taxed on Form 4970 with an interest charge figured on Form 3520's Schedule C, and the rest is ordinary income,^188,175,189 and once you use the default method you must keep using it in later years, except that in the year the trust ends you may use the actual method if you have the statement.¹⁹⁰ In the trust's first year as a foreign trust, you stop Part III once you have entered how many years it has been foreign, so no accumulation distribution is figured that year.¹⁹¹ The statute treats the whole distribution as an accumulation distribution where adequate records are not given;¹⁹² the default method is the IRS's relief from that, open if you can give the trust's distributions for the three years before,¹⁹³ and where there were none, it too makes the whole distribution an accumulation distribution.¹⁸⁸ A foreign trust's distributable net income, the income its distributions carry out, includes its capital gains,¹⁹⁴ and the exception for income kept before a beneficiary was born or turned 21 does not apply to it.¹⁹⁵ FBAR (FinCEN Form 114) and Form 8938 are separate and may also apply.¹⁹⁶