You probably own Indian mutual funds you do not know about. Joint folios with parents, inherited holdings and old NRE-linked accounts often list NRIs as second or third holders. Every unit you legally own is a PFIC under US tax rules, even if you have never logged in.
A PFIC is a Passive Foreign Investment Company, the US tax label for a foreign fund that earns mostly passive income. Every Indian mutual fund is one. PFICs are taxed punitively by design. Excess distributions are taxed at the highest ordinary rate (37%), plus an interest charge that compounds from the year the gain "should have" been recognized. Effective rates routinely cross 50%. Each fund also needs its own Form 8621 on your US return, every year you hold it.
Inheritance is when the exposure is greatest. A parent's mutual fund portfolio transfers to you on their death, and the PFIC clock starts immediately. You inherit the assets, and with them the obligation to file 8621 for every fund in the portfolio, for every year going forward.
How you become a joint holder without knowing
The exposure most NRIs miss comes from funds they inherited a holder slot on, often years before they moved to the US, rather than funds they bought.
Indian families routinely add the eldest child, or all children, as second and third holders on mutual fund folios for "succession ease." The practice avoids probate and simplifies access if a parent becomes incapacitated. It is standard estate planning in India. It also makes every one of those funds a PFIC for the US-resident joint holder, from the moment their name was added to the folio.
Joint holder status is not the same as nominee status. A nominee receives the asset on the holder's death but does not own it during the holder's lifetime. A joint holder owns the asset jointly throughout.
Under US tax rules, you do not get to look at the funding source (your parent's bank account) to determine PFIC ownership. You look at the holder list. If your name is on it, you own a share.
Inheritance compounds the problem. When a parent dies and a portfolio transfers to you, every fund in it becomes your PFIC from that moment. The cost basis steps up under US rules, and that part is favorable. But the per-fund, per-year Form 8621 filing obligation begins immediately, and Section 1291, the default and harshest PFIC tax method, applies.
If you inherit a portfolio of 15 Indian mutual funds, you have 15 PFICs and 15 Form 8621 filings every year until you exit each position.
The cleanup playbook
Step one is the audit. Get your parents to share every CAMS and KFintech consolidated statement for any folio where you appear as a holder. Pull your own statements for folios in your name. CAMS issues a "CAS" (Consolidated Account Statement) that shows all holdings across all AMCs they service. (An AMC is an asset management company, the firm that runs a mutual fund.) KFintech issues the same for the AMCs they service. Between the two, you have a complete inventory.
Step two is to triage by holder position. First holder funds are unambiguously yours and unambiguously PFICs. Second holder funds are also yours under US tax rules even if the first holder funded them. Third holder funds are the same. Do not let "but my dad bought it" alter your reporting position. It makes no difference to the IRS.
Step three is to decide on elections fund by fund. There are three ways a PFIC can be taxed: Section 1291, QEF (Qualified Electing Fund) and MTM (mark-to-market). For each fund, check whether the AMC issues PFIC Annual Information Statements. The answer is almost always no, but check. If yes, QEF is the right path. If no, check whether the fund is exchange-traded and marketable for MTM purposes.
If neither applies, Section 1291 is your default. The only question then is whether to keep holding (and accumulating future excess-distribution exposure) or to exit and pay the one-time hit.
Step four is to file 8621 for every fund, every year, going forward. If you have missed prior years, this is where you need a cross-border CPA. The IRS Streamlined Filing Compliance Procedures exist for non-willful past non-filers and can cap the penalty exposure, but they have to be initiated before the IRS contacts you.
We are not going to walk you through that process here. The eligibility analysis is fact-specific, and getting it wrong can convert a non-willful disclosure into a willful one. Find a CPA who has done Streamlined filings before.
If your parents are still setting up their folios, the choice between naming you as a joint holder and naming you as a nominee is worth raising with them now, as part of estate planning across both countries.
Playbook Move: Stop buying Indian mutual funds. Even if your AMC is one of the few that still accepts US-resident NRIs, every unit you buy is a PFIC, taxed punitively, with mandatory per-fund-per-year filing. For India equity exposure, use US-domiciled India ETFs. INDA, FLIN, EPI, SMIN and INDY all report on a 1099 and avoid PFIC treatment entirely. The underlying market is the same and the taxes are much simpler.
AMCs still open to US-NRIs (and why that's not good news)
Post-FATCA, most Indian AMCs closed the door to US and Canada-resident NRIs to avoid the compliance burden. A handful still accept new investments, each with its own friction. As of mid-2026:
- Aditya Birla Sun Life Mutual Fund (online onboarding available, FATCA self-declaration required)
- SBI Mutual Fund (offline only, physical declaration required, some sources require physical presence in India)
- ICICI Prudential Mutual Fund (offline only with additional signed declaration, most schemes restricted)
- UTI Mutual Fund (online accepted, digital declaration sufficient)
- Nippon India Mutual Fund (online onboarding available, standard FATCA self-declaration)
- Sundaram Mutual Fund (offline only, physical declaration required)
- PPFAS Mutual Fund (offline only, physical declaration, and SEBI overseas-investment caps have intermittently suspended fresh inflows into the flagship Flexi Cap fund)
- Quant Mutual Fund (offline only, physical declaration required)
- Tata Mutual Fund (offline only, physical declaration required)
- Navi Mutual Fund (online accepted, digital declaration sufficient)
Conditions vary by scheme within each AMC. Some accept lump sum only with no SIP, some restrict close-ended funds, and some require an Indian NRE/NRO bank account before any transaction. The list also changes without notice, so verify directly with the AMC before any transaction.
Every fund on this list is still a PFIC under US tax rules. The open door does US-NRIs no service. It is the same PFIC problem with extra paperwork. If you are a US tax resident, the right move is almost always a US-domiciled India ETF. That holds even when an Indian mutual fund is willing to take your money.
The order to work in
If you are starting from nothing, the newsletter's points line up in this order:
- Ask your parents which folios carry your name, and whether you are a joint holder or only a nominee.
- Collect the CAMS and KFintech statements so you have one list of every fund.
- Stop adding new money to Indian mutual funds while you sort out the old ones.
- Take the list to a cross-border CPA, decide fund by fund whether to hold or exit, and file Form 8621 for each one from here on.
The same Indian accounts and folios may also need to go on your foreign account report. See the FBAR deadline and which Indian accounts count, or book a tax consult if you have missed earlier years.
From Edition 6 of the NRI Playbook newsletter. For informational purposes only; not financial, tax, or legal advice. For decisions about your specific situation, consult a qualified cross-border tax professional.