Overview: Are NRIs in the US Taxed on EPF Withdrawal?

If you’re an NRI living in the USA and considering withdrawing your Indian EPF (Employees’ Provident Fund), one of the most common questions is:

Is EPF withdrawal taxable in the USA?

The answer isn't black and white – it depends on how EPF is classified under US tax law, and whether you can claim relief under the India-US Tax Treaty.

This blog answers key questions around:

• EPF withdrawal taxability for US residents
• Whether the entire EPF amount is taxed or only the interest portion
• How to minimize tax using Article 20 of the India-US DTAA
• What IRS forms you may need to file
• Reporting requirements under FBAR and FATCA

Let’s break it down.

How Does the US Tax EPF Withdrawals?

Is EPF Considered Taxable Income in the USA?
There are two widely accepted interpretations of how EPF withdrawal is taxed for US residents or green card holders:

EPF as a Foreign Retirement Investment Account

If EPF is treated as a foreign retirement or pension account, the taxation rules typically include:

• Only the interest or growth (income component) in the EPF is taxable in the USA
• The principal contributions made from your salary in India (already taxed there) are not taxed again
• The interest earned may be reported as ordinary income on your US tax return (Form 1040)

Tax Tip: To accurately calculate the taxable portion, maintain records of your contributions and annual interest received.

EPF as Social Security – Use Article 20 of the India-US Tax Treaty

A more beneficial interpretation is to classify EPF as a social security-type scheme under the DTAA India USA. Here’s what that means:

• Article 20 of the India-USA Tax Treaty states that social security and similar public pensions are taxable only in the country of origin (India)
• This means no tax liability in the US on EPF withdrawals if you treat it under this article
• Even US citizens and green card holders are not excluded by the savings clause for this article

Many NRIs and tax professionals use this position to avoid double taxation on their EPF withdrawals

Do Indian Banks Report EPF Withdrawals to US Tax Authorities?

No, Indian banks do not directly report EPF withdrawals to the IRS.

However:

If your EPF withdrawal is credited to an Indian bank account, and you are a US tax resident, it becomes a reportable foreign asset under FBAR (FinCEN Form 114) and FATCA (Form 8938) rules

FATCA data-sharing between India and the US can flag large account balances

You are responsible for disclosing and reporting such income on your US tax return

Which US Tax Forms Should NRIs File for EPF Withdrawals?

Penalties for non-filing of FBAR or FATCA can be significant, so always ensure compliance.

Key Points for NRI EPF Withdrawal from USA

How Dinesh Aarjav & Associates Can Help

We specialize in:

• NRI tax planning for EPF, PPF, NPS and other Indian retirement funds
• US-India tax treaty advisory for EPF and investment income
• Assisting with Form 15CA/CB for EPF remittance
• Filing US tax disclosures (FBAR, FATCA, 1040) via partner CPAs in the USA

Our team at Dinesh Aarjav & Associates helps NRIs navigate complex cross-border tax matters with clarity and compliance.

FAQs on EPF Withdrawal for NRIs in the USA

Is the full EPF amount taxable in the USA?
No. Typically, only the interest portion is taxable unless EPF is treated as social security under Article 20 of the tax treaty.

Can I avoid US tax using the India-US tax treaty?
Yes. Article 20 allows EPF to be taxed only in India if treated as a social security-like payment.

Do I need to report EPF withdrawal on my US tax return?
Yes, at least the interest earned or total withdrawal should be reviewed and reported as per IRS compliance rules.

Need Help With EPF Withdrawal or Tax Planning as an NRI?
Whether you're a US green card holder, citizen, or NRI in the US, withdrawing your EPF without proper planning can trigger unexpected tax consequences.

Connect with Dinesh Aarjav & Associates – India’s trusted NRI tax advisory firm with over 25 years of experience in cross-border taxation, EPF/PPF withdrawals, and US compliance reporting.