The PFIC trap, avoided.
US and Canadian investors can get badly caught holding the wrong Indian fund structure. Here's what triggers it — and how we route around it.
Why pooled funds bite.
Pooled funds are usually PFICs
For a US person, most Indian mutual funds and Cat III AIFs are treated as Passive Foreign Investment Companies.
Form 8621, every year
Each PFIC holding needs its own annual filing. Miss it and the return stays open to the IRS indefinitely.
The punitive default
The excess-distribution regime stacks tax plus interest — the effective hit can approach half your gains, with no long-term rate.
Own shares, not the trap.
in the last 18 months.
PMS holds securities in your name
A PMS is direct ownership of underlying shares — not units of a pooled foreign fund — which is generally treated very differently from a PFIC. We still confirm it for your facts.
We screen before we suggest
For US and Canada clients, every shortlist is checked for PFIC exposure first. Structures that would trip it don't make the list.
Your CPA gets the paperwork
We hand over the holding structure and statements so your tax professional can file cleanly, with nothing to reconstruct.
Important: this is general information, not US or Canadian tax advice. PFIC treatment turns on your specific facts — always confirm with a qualified US/Canada tax professional (CPA) before investing.