PFIC cost estimator for Indian mutual funds (US)

Enter what you paid, what you sold for and the dates. You'll see the US tax and interest with no election, what mark-to-market would have cost instead, and how each year's share was worked out.

Fact-checked against official sources · 27 Sep 2026Next review May 2027US tax year 2026

Default method: US tax and interest

$12,706

With no election, this $25,000 gain costs about $12,706 in US tax and interest, 50.8% of the gain. With mark-to-market from the year you bought, it's $8,000, paid year by year. On these figures mark-to-market costs $4,706 less in total, adding up tax paid in different years at face value.

Year-of-sale share, at your rate$182

Earlier years’ shares, at the top rate each year$9,097

Interest charge on those$3,427

Default method, total$12,706

Mark-to-market, total over the years$8,000

How the default method spreads your gain
Year	Days	Share	Rate	Tax	Interest
2017	291	$2,213	39.6%	$876	$591
2018	365	$2,775	37%	$1,027	$604
2019	365	$2,775	37%	$1,027	$521
2020	366	$2,783	37%	$1,030	$471
2021	365	$2,775	37%	$1,027	$425
2022	365	$2,775	37%	$1,027	$345
2023	365	$2,775	37%	$1,027	$246
2024	366	$2,783	37%	$1,030	$152
2025	365	$2,775	37%	$1,027	$72
2026 (sale)	75	$570	32%	$182	—
Total	3288	$25,000		$9,279	$3,427

Mark-to-market, year by year
Year	Value	Ordinary income	Tax
2017	$22,000	$2,000	$640
2018	$21,500	−$500	−$160
2019	$24,000	$2,500	$800
2020	$25,500	$1,500	$480
2021	$31,000	$5,500	$1,760
2022	$30,000	−$1,000	−$320
2023	$34,000	$4,000	$1,280
2024	$41,000	$7,000	$2,240
2025	$44,000	$3,000	$960
2026 (sale)	$45,000	$1,000	$320
Total			$8,000

Interest runs from each year's April 15 due date to April 15, 2027, compounded daily. Interest after the last IRS rate in our register assumes that rate carries on. Figures for tax year 2026-27, checked 27 September 2026. Your bracket is 32%.

How this is worked out

For a US tax resident, an Indian mutual fund is a passive foreign investment company, and selling units is taxed under the PFIC rules, not as an ordinary capital gain. Our full guide to Indian mutual funds and PFIC explains why, and what India takes on the same sale. This page does the arithmetic for one purchase.

With no election

The gain (what you sold for, less what you paid) is divided evenly across every day you held the units, counting from the day after you bought to the day you sold. Each calendar year gets its share.

The year you sell: its share is ordinary income, taxed at the bracket you enter.
Every earlier year: its share is taxed at the highest individual rate in force that year, from our register (37% since 2018; different in earlier years). Interest then runs on that tax from the return due date for that year to the return due date for the year you sell, compounded daily at the IRS underpayment rate for each quarter (7% now).
Days before you became a US tax resident: if you bought before you moved, enter the date your US residence began. Those days still count in the holding period, but the regulations say the fund isn’t a PFIC for them (Treas. Reg. §1.1291-9(j)(1)). Their share is added to the year you sell and taxed at your bracket, with no top rate and no interest.

The table under the result shows every year’s days, share, rate, tax and interest, so a preparer can check it against Part V of Form 8621.

With mark-to-market

The estimator assumes you elected mark-to-market for the first year you held the fund as a US tax resident, measured from what you paid. At each December 31 the units are treated as sold at their value: a rise over your adjusted cost is ordinary income at your bracket; a fall is deductible only up to earlier rises you’ve reported and not yet reversed. In the year you sell, the gain is ordinary income, and a loss is ordinary up to what’s left of those earlier rises and a capital loss beyond. Years you leave blank are estimated on a straight line.

What the estimator leaves out

Assumptions

One purchase, with no distributions before the sale and no earlier sales of the same fund. An SIP is many purchases: run each lot separately.
Leave the US tax resident date blank and you’re taken to be a US person for the whole holding. The rule for earlier days comes from a regulation on a different election, but advisers generally apply it this way; your CPA will confirm. A sale before that date isn’t taxed by the US.
Holdings from 2000 onward. Our register of IRS interest rates starts then, so if you held the units as a US person before 2000, the estimator asks you to see a CPA rather than guess.
Mark-to-market from the first year. If you elect later, the growth up to the election year is first taxed with no election, which this estimator doesn’t model.
One federal bracket for every year. No state tax, net investment income tax or alternative minimum tax, and no limits on deducting a capital loss.
Return due dates are taken as April 15, without weekend or holiday shifts. After the last quarter in our register, the latest IRS rate is assumed to continue.
All amounts in US dollars at the exchange rate on each date. Currency gains and losses aren’t separated out.
Indian tax is applied only as far as you tell us it’s creditable, and only against the tax for the year of sale, under both methods. The special PFIC rule that spreads foreign tax over the holding period covers only tax withheld on a distribution, not tax on a sale (the instructions for Form 8621, line 16d). Whether the credit can also reduce the earlier years’ tax is a point for your preparer, so the estimator doesn’t assume it can. It never reduces the interest.

What to do with your result

If the no-election figure is much higher, and you still hold the fund, ask a CPA whether electing mark-to-market now makes sense for the years ahead. If you’re about to sell, have the preparer run the real figures for every lot before you file. Our other calculators cover the Indian side, including the tax on your Indian return.

When to get a US CPA

Before you sell or redeem, so the lots, dates and exchange rates are right from the start.
If you’ve held Indian funds for years without filing Form 8621.
If you bought through SIPs and have more lots than you can track.
If you bought the funds before you became a US tax resident.
If you want to claim Indian tax on Form 1116.

PFIC filings usually need a US CPA or Enrolled Agent who prepares them regularly.

Next steps

Read the guide behind the numbers

Questions

Questions about this calculator

Why does the estimate use the top rate when I'm in a lower bracket?

Because the law does. With no election, each earlier year's share of the gain isn't added to that year's income; it's taxed separately at the highest individual rate in force that year, whatever bracket you were in. Only the share that falls in the year you sell is taxed at your own rate. The estimator reads those top rates, year by year, from our facts register.

How accurate is the interest figure?

Close, not exact. It compounds daily at the IRS underpayment rate for each quarter, from each year's return due date to the due date for the year of sale, as Form 8621 requires. It ignores due dates that move for weekends and holidays, and assumes the latest known rate carries on past the last quarter the IRS has announced. Your preparer's software will differ by a few dollars.

I don't have the value at every year end. Can I still compare mark-to-market?

Yes. Leave any year blank and the estimator assumes the fund grew in a straight line between what you paid and what you sold for. That gives the right total under mark-to-market when every year is a gain, but it misses the effect of years when the fund fell. Your fund house's year-end statements give the real figures.

Why isn't the Indian tax just subtracted?

Because only the part you can actually credit reduces US tax. The foreign tax credit is limited to US tax on foreign-source income, and a US resident's gain on selling shares is usually US-source, so the usable credit is often smaller than what India took. Some advisers treat the gain as foreign under a treaty-based rule and others don't; that point isn't settled. The estimator applies what you enter only to the tax for the year of sale, not to the earlier years' tax or the interest. Enter only the amount your preparer says is creditable on Form 1116.

Does this work for an SIP?

One lot at a time. Each SIP instalment has its own purchase date and cost, so run the estimator for each lot (or group instalments bought in the same month) and add the results. The fund still needs only one Form 8621 a year.

Sources

Update log

5 November 2026First published.