How to file US Tax on NRE Interest 1099-INT


File NRE account interest in USA tax return. Exchange rate for USD conversion by IRS. 1099-INT is not given by Indian bank. NRE NRO FD interest is taxable.


First quarter of the year is tax return filing season in USA and many questions hover in mind, when you hold a NRI or NRO or both accounts in an Indian bank.

Normally, you would hear the advice from friends that you do not need to file Indian NRE/NRO account interest tax in USA. Please don’t listen to them as this is completely wrong.

You are supposed to add all your income from India, to your US income and pay taxes, if you are a Green Card holder, PIO, OCI or legal resident (working on H1B, L1B, H4 EAD or any other work visa).

NRE FD, NRO FD interest is also taxable.

The income includes the dividend too, if you have invested in mutual funds or SIP (systematic investment plan) in India.

US tax on NRE FD interest

US tax on NRE FD interest

Calculate dollar amount for US Tax on NRE Interest or NRO account

The question has a simple answer if you know the exchange rate to convert your total Indian interest earned.

Well, IRS publishes the exchange rate for all foreign countries on their website and is called year end treasury rates. Use this rate to convert Indian (or for that matter, any other country) to reach a USD amount.

For year 2015, the rates are available here.

USD exchange rate for NRI account interest tax for 2015

USD exchange rate for NRI account interest tax for 2015

Example,

If you earned total of 10,000 INR as interest (add the sub-totals of all your foreign bank account’s interest), then your interest income in USD would be


10,000 / 66.1 = $ 151.285

In case of NRE account, the interest income is non-taxable in India. Hence, no tax was withheld/paid in India.
On the other hand, NRO account interest is taxable at straight 30% (plus applicable surcharges and cess).

I would advise you to file the US income tax form 1040 with online services like TurboTax, TaxAct or H&R block. I have been using TurboTax for last 2 years and it’s interface is pretty user friendly. I am sure other services are equally good.

Irrespective of the service you use, you should fill up Schedule B to disclose your foreign income. Online services would make this task a lot easier as they would fill up most of the fields for you.

Enter zero on the fields that ask for tax already deducted.
If you also have (NRE) of account, you would enter zero. If it is NRO, find the total amount of Tax (Called TDS) deducted by bank (by looking at bank statements). Bank would also send you Form 16. (ICICI normally sends it by postal mail or email – if you have registered).

On the other hand, If you really paid any income tax, in your foreign (the tax might have been applied, if you are not from India) country, you should enter the information in appropriate section.

Frequently Asked Questions FAQ


Do Indian banks issue form 1099-INT for interest income?

No, they do not. You are responsible for disclosing the foreign interest income on the income tax return.

Even US based banks do not issue 1099-INT even the total interest for the year in less than $10.

How to find total interest earned in Indian Bank for the year?

This is pretty simple. Almost all the banks in India pay out interest quarterly (every 3 months).

So, you just need to pull out your each bank (e.g ICICI, SBI, HDFC, Kotak etc.) statement ending in March, June, September and December. Find the interest pay-out and add to grand total.

Count March (of preceding year) interest as well. Remember, financial year in USA is counted from 1 Jan to 31 Dec whereas in India, it is 1 April to 31 March.

For example,

For tax year 2015, count March 2015’s foreign bank account interest.

Do we have to pay tax on NRO account Interest in USA?

Yes, you have to.

NRO account interest income in taxed in India at the rate of 30% (plus applicable surcharges and cess). You have to add it as part of your income while filing for US taxes. Use the above method of INR to USD conversion for getting a dollar value.

NRE account tax implications?

There are no major tax implications apart from:

  1. Reporting the account details using FBAR form and
  2. Adding interest income to your US income tax return.

  • cyclops

    The rupee has depreciated over the years against the dollar. So a 10% interest income is not really 10% when accounting for the depreciation. Is there a way to adjust for the depreciation when paying US tax on this interest income?

  • Hi cyclops,
    I don’t really understand what you mean by real depreciation here.
    If you mean that you lost money while converting the USD to Rupee as an investment, then I am afraid that there is no such depreciation available for currency. I have never heard of any such concept either.
    That’s a risk that you as an individual take while investing in currency hedge.

    In-fact, it is a very good question and I will try to find some more information about it.

  • cyclops

    What I mean is, let’s say:
    1. USD 1000 was worth Rs 50000 10 years age at Rs 50 = 1 USD
    2. Now with Rs 67 = 1 USD, the value of Rs 50000 is USD 746.
    3. Even if I was getting 10% interest per year, my Rs 50000 is now Rs 100000 but that is USD 1492 and not USD 2000.

    However I will have to pay tax on the 10% interest income every year which will come out to ~ USD 1000. If 30% tax then I got USD 492 but paid USD 300 in tax.

  • sagarun

    NRO account interest is taxable in india at 30%.

    The following statement in your article is wrong


    NRO account interest income in NOT taxed in India. You have to add it
    as part of your income while filing for US taxes. Use the above method
    of INR to USD conversion for getting a dollar value.

  • Thanks Sagarun for pointing out the mistake. We have updated the article.

  • sagarun

    I do not see any update. The FAQ entry “Do we have to pay tax on NRO account Interest?” still reads the same

  • Yes, that’s because of caching on the server. It will be re-cached with updated version within a day on all servers.
    If you do ctrl+F5 on your browser, you would probably see an updated version right away.

  • Indian Tiranga

    Citibank issues 1099-INT for your interest income on NRE account. They convert it into USD and reports on 1099-INT. However they somehow shows their address as that of New York

  • Yes, I have heard about banks who have their presence in USA, issuing 1099-INT.
    But, Indian banks like ICICI do not do it.

    Thanks for sharing the information.

  • AA

    For NRIs, some FD’s in India are not taxable. The interest is only paid at the time of maturity. Do we have to US Income tax on interest of matured (non taxable) FDs or also on notional interest. Notional interest means that this is the interest which we will get for the current FY, when it matures. Notional interest is not paid out to the FD owner in the FY.

  • 1. If you are in US, you have to follow the US tax rules. Even if some income is NOT taxable as per Indian rules but is taxable as per US rules, you have to count it as taxable in your US income tax return.
    2. You can just count the actual interest that is paid to you by Indian bank during the US financial year. The Indian bank will also provide you with form 16 (income tax paid in India) statement.
    You should include the Interest that has been actually paid out on maturity in the same financial year that it was paid out (depends on what US financial year it occurred).

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