Why NRIs in Virginia Tax Lawyer Must Declare Foreign Assets

If you’re an NRI or OCI residing in Virginia and qualify as a U.S. tax resident under either the Green Card Test or Substantial Presence Test, you’re obligated to declare foreign financial assets under U.S. federal law. While Virginia state tax laws focus on domicile and source of income, federal law mandates comprehensive disclosure. A skilled Virginia tax lawyer will help you understand how U.S. tax residency status, state domicile, and global income all interact in your tax filings.

Virginia Tax Lawyer: The Federal Requirements: FATCA and FBAR

FATCA Compliance for NRIs

The Foreign Account Tax Compliance Act (FATCA), enacted in 2010, requires U.S. taxpayers to disclose foreign financial assets on Form 8938 if their value exceeds:

$50,000 for single filers
$100,000 for joint filers

This includes:

Bank accounts (NRE/NRO/FCNR) in India
Indian mutual funds and demat accounts
Insurance policies with cash value
Indian stocks and fixed deposits

Non-compliance can result in penalties starting from $10,000 and criminal charges in cases of wilful default. Working with a Virginia tax lawyer ensures proper reporting under FATCA.

FBAR (FinCEN Form 114)

If your foreign accounts collectively exceed $10,000 at any point during the year, you must file an FBAR (FinCEN Form 114), separate from your federal return. This is often overlooked, yet it’s a critical aspect of NRI tax reporting.

1. State-Level Taxation: The Virginia Perspective

Virginia determines residency using the “domiciliary resident” concept. If Virginia is your legal home, then you must report global income on your state tax return, regardless of citizenship or immigration status.

Unlike federal law, Virginia does not allow a tax credit for foreign taxes paid (except on some foreign pension income). Hence, income from Indian property or investments could be taxed again at the state level.

That’s where a Virginia tax lawyer is vital to ensure optimal tax planning, avoid double taxation, and maintain documentation across jurisdictions.

2. Recent Legal Developments in India and the US

While U.S. reporting frameworks like FATCA and FBAR remain consistent, India has introduced notable compliance enhancements for NRIs:

Form 67 is now mandatory to claim foreign tax credit under the Double Taxation Avoidance Agreement (DTAA)
Schedule FA must be filed in Indian ITR if your residential status is Resident and Ordinarily Resident (ROR)
The PCIT v. NRA Iron & Steel Pvt. Ltd. case reinforced stricter scrutiny of foreign inflows into Indian accounts

Even though these updates don’t directly alter U.S. tax laws, they require NRIs to coordinate both Indian and U.S. filings strategically.

3. Special Consideration: Indian Mutual Funds and PFIC Reporting

Indian mutual funds are often classified by the IRS as Passive Foreign Investment Companies (PFICs). Reporting these requires Form 8621, which is highly technical and must be handled carefully.

Failure to disclose PFICs can lead to unfavourable tax treatment, including excess distribution taxation and interest charges. This is one of the most important reasons HNIs should work with a Virginia tax lawyer who specialises in cross-border taxation.

4. Voluntary Disclosure: A Path to Compliance

If you’ve missed previous FATCA or FBAR filings, don’t panic. The IRS’s Streamlined Filing Compliance Procedures offer a way to rectify non-compliance with reduced penalties and no criminal charges.

A knowledgeable Virginia tax lawyer can help you:

Determine eligibility for streamlined procedures
Correct past tax returns
Disclose assets properly to avoid scrutiny
Mitigate risks of future audits

FAQs for NRIs & OCIs in Virginia

1. Do I need to report my Indian bank accounts if they are dormant or low-value?

Yes. If the combined value of all foreign accounts exceeds $10,000, you must file an FBAR, regardless of activity.

2. What are the penalties for FATCA and FBAR non-compliance?

Penalties start at $10,000 for non-willful violations and may reach $100,000 or 50% of the account balance for wilful violations.

3. Can I get relief under DTAA if I’ve paid tax in India?

Yes. You can file Form 67 with your U.S. return and claim a foreign tax credit to prevent double taxation under the India-US DTAA.

4. How do I report Indian mutual funds to the IRS?

Use Form 8621 to disclose PFICs. This requires detailed calculations and professional handling.

5. What should I do if I haven’t reported foreign assets in previous years?

You should act immediately. The IRS’s Streamlined Filing Program allows you to disclose prior non-reporting. Engage a Virginia tax lawyer to handle this correctly.

Outlook: Global Wealth, Local Compliance

The intersection of U.S. federal tax laws, Virginia state rules, and Indian compliance makes it essential for NRIs and OCIs to customise their tax strategy. Whether you’re managing inherited wealth, planning succession, or investing across borders, professional support makes all the difference.

As regulations grow stricter and global data-sharing expands, it’s no longer enough to simply file taxes you must do so strategically and accurately. Partnering with a legal expert ensures compliance, minimises penalties, and protects your legacy.

Conclusion: Choose the Right Legal Partner

For NRIs and OCIs living in Virginia, declaring foreign assets isn’t just a matter of paperwork it’s a legal obligation governed by complex international laws. You must comply with FATCA, FBAR, and state rules, while leveraging the DTAA where applicable. From understanding IRS residency tests to handling PFICs and Form 8938, only an experienced Virginia tax lawyer can guide you safely through the process.

About LawCrust Legal Consulting

LawCrust Legal Consulting, a subsidiary of LawCrust Global Consulting Ltd., is a trusted legal partner for NRIs and Indians across the globe. Backed by a team of over 70 expert lawyers and more than 25 empanelled law firms, we offer a wide range of legal services both in India and internationally. Our expertise spans across legal finance, litigation management, matrimonial disputes, property matters, estate planning, heirship certificates, RERA, and builder-related legal issues.

In addition to personal legal matters, LawCrust also provides expert support in complex corporate areas such as foreign direct investment (FDI), foreign institutional investment (FII), mergers & acquisitions, and fundraising. We also assist clients with OCI and immigration matters, startup solutions, and hybrid consulting solutions. Consistently ranked among the top legal consulting firms in India, LawCrust proudly delivers customised legal solutions across the UK, USA, Canada, Europe, Australia, APAC, and EMEA, offering culturally informed and cross-border expertise to meet the unique needs of the global Indian community.

Are NRIs Required to Declare Foreign Assets During Tax Filing in Virginia Tax Lawyer?