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I have been residing in the US since 2012. I have recently started working for an employer since 2014. I have three related questions. Due to lack of due diligence on my part, I missed couple of important errands and want some help.

  • I have three savings accounts that are currently open in India in different banks. Is it legal to have savings accounts open while I am in the US?

  • I have been sending money monthly (1000$+) to one of the savings account that I mentioned above which I believe has my father as a joint account holder. My father uses this money to pay off my educational loan. My question is, do I have to declare this fact in the tax filings in US given that my tax is already deducted? Does my father have to declare the additional deposits?

  • If I have done something out of line, what is the best way to go about correcting it?

Thanks

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I can't address Indian law but US law has no problems with you having savings accounts in India. Furthermore, there are no tax consequences from paying off the student loan.

However there is big problem here--while the US has no rules against foreign bank accounts it has reporting rules that you certainly have violated (if you hadn't violated them you wouldn't be asking the question.)

1) Those foreign bank accounts must be listed on your tax return.

2) Those foreign bank accounts must be listed on a PDF that's filed with the (Financial Crimes Enforcement Network. (Yes, it's very stupid they need identical information sent to two different departments.)

2) The interest you earned on that bank account is income that should have been reported on your return.

As for what to do about it--this is the realm where you get professional help. As for the outcome--since you didn't set out to cheat they have a much less harsh system set up. Expect to amend your 2012 and 2013 returns (and 2014 if you've already filed it), pay interest and late-payment penalties on the additional tax caused by the interest and pay a penalty of 5% of the highest total value of the accounts.

Since the discovery of large amounts of money being hidden from the taxman in Swiss bank accounts Congress has gone 1000# gorilla about it and been pressuring foreign banks to cough up the details on any US-citizen or US-resident depositors.

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I have three savings accounts that are currently open in India in different banks. Is it legal to have savings accounts open while I am in the US?

If you are NRI [from what you have stated you are], you cannot hold a "Savings" account in India. Please have the accounts converted as NRO at the earliest. It is a simple matter of contacting Bank and completing formalities with some paperwork.

do I have to declare this fact in the tax filings in US given that my tax is already deducted?

Yes, interest would be taxable in US.

Does my father have to declare the additional deposits?

No.

Edit to reply to comment:
RBI
Economic Times

  • >you cannot hold a "Savings" account in India. Can you show me where you got that from? – happybuddha Mar 6 '15 at 2:14
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    @happybuddha See Edit. Just google and you will see tons of articles mentioning one cannot hold. – Dheer Mar 6 '15 at 4:20

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