Indian FD Interest on US Taxes: Reporting Guide

If you hold fixed deposits in Indian banks while on an H-1B visa, the interest earned is taxable in the United States — even if TDS has already been deducted in India. Here is how to report it correctly and avoid double taxation.

Is Indian FD Interest Taxable in the US?

Yes. As a U.S. tax resident (H-1B holder who passes the Substantial Presence Test), you are taxed on worldwide income. This includes interest earned on fixed deposits held in Indian banks — NRO FDs, NRE FDs, and tax-saving FDs alike.

The fact that India has already deducted TDS on this interest does not exempt it from U.S. taxation. However, you can claim the TDS as a Foreign Tax Credit to avoid paying tax twice.

How to Report Foreign Interest on Schedule B

Report Indian FD interest on Schedule B, Part I (Interest). List the name of the Indian bank and the interest amount in U.S. dollars:

• Enter the bank name (e.g., "State Bank of India — NRO FD")
• Enter the interest amount converted from INR to USD
• If you have multiple FDs at different banks, list each separately

In Part III of Schedule B, answer "Yes" to question 7a (Did you have a financial interest in or a signature authority over a financial account in a foreign country?) and list India as the country. This triggers the FBAR reminder but does not substitute for the actual FBAR filing.

INR to USD Conversion for FD Interest

Convert Indian FD interest from INR to USD using the IRS yearly average exchange rate. For TY2025, the approximate rate was 84 INR per USD. The IRS publishes official rates at irs.gov/individuals/international-taxpayers/yearly-average-currency-exchange-rates.

For more details on exchange rate selection, see our INR to USD conversion guide.

Claiming TDS Credit via Form 1116

Indian TDS deducted on FD interest is creditable on Form 1116 under the passive income category. The credit directly reduces your U.S. tax liability:

• Complete Form 1116 for passive category income
• Enter the Indian FD interest as foreign source income
• Enter the TDS amount (converted to USD) as foreign tax paid
• The credit is limited to the U.S. tax on the foreign income

If the TDS rate (30% for NRIs, or 10% with treaty benefit) exceeds your U.S. effective tax rate on the same income, the excess credit can be carried forward for up to 10 years.

FBAR and FATCA: Reporting the Underlying FD Account

Beyond reporting the interest income, the FD accounts themselves must be reported if they meet the thresholds:

• FBAR: File if the aggregate value of all foreign accounts (including FDs) exceeded $10,000 at any point during the year.
• FATCA (Form 8938): File if foreign financial assets exceeded $50,000 at year-end (single) or $100,000 (MFJ).

Report the maximum value of each FD during the year, including any auto-renewed FDs where the principal plus accrued interest is reinvested.

NRO vs NRE Fixed Deposits: Tax Differences

The key difference: NRO FD interest has TDS withheld, which you can credit on Form 1116. NRE FD interest is tax-free in India, so there is no TDS to credit — you pay full U.S. tax on NRE interest.