Reporting India 54EC bonds in form 8938

Forum|Forum|1 month ago
May 2, 2026
1 reply
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Hi,

I inherited REC 54 EC bonds in India that I need to report on form 8938. The bonds were transmitted to my name by Kfintech and they generated a folio number with approval from REC. Also, REC still holds the bonds after transfer to my name. I am trying to understand under what section of 8938 to report the folio number with bonds.

TIA

Best answer by pk_

@Turbotaxuser1 , Namaste User1 ji.

As in my earlier note , for purposes of form 8938 / Specified Foreign Financial Assets, a Bond is treated as "other" asset --- ( being similar to a stock in that it is debt owed by the entity but there is no specific share of the value of the entity)-- see here from the instruction for the form ---> page 7 --> Instructions for Form 8938 (Rev. November 2021)

"Other Specified Foreign Financial Assets

Examples of other specified foreign financial assets include the following, if they are held for investment and not held in a financial account.
• Stock issued by a foreign
corporation.
• A capital or profits interest in a
foreign partnership.
• A note, bond, debenture, or other
form of indebtedness issued by a foreign person.
• An interest in a foreign trust or
foreign estate.
• An interest rate swap, currency
swap, basis swap, interest rate cap,
interest rate floor, commodity swap,
equity swap, equity index swap, credit
default swap, or similar agreement
with a foreign counterparty.
• An option or other derivative
instrument with respect to any of
these examples or with respect to any
currency or commodity that is entered
into with a foreign counterparty or
issuer"

Here, Foreign "person", "entity", "counter-party" etc. all mean generally the same things and as applicable.

Since your bond / note is an obligation of a Foreign entity, you treat this as a Specified Foreign Asset under the "OTHER" category PART-II, you report the interest earnings on line 14 (a) --PART-III and details of the asset --PART-VI -- including line 36 --- you are dealing with an issuer ( REC ? ) and not counterparty

Does this more sense ? Is there more I can do for you ?

Namaste ji

pk

P

pk_

Level 15

@Turbotaxuser1 , userji, a few points on your situation:

(a) for form 8938 ( assuming you meet the threshold ), Part-II -- report max value of the asset ( other ); Part III report any interest earnings (thought this was in the range of 5.xx% PY); Part VI --- provide details

(b) because this is inherited --- you may want to get the FMV of the bonds ( I am assuming that here is a diff between face value and actual sale value , before maturity)

(c) even though India appears not to tax the earnings ( interest), US will still tax this income-- ditto for any cap-gain ( assuming LTCG).

(d) depending on the exact nature of transfer ( as part of inheritance ) there may be need for form 3520.

Is there more I can do for you ? If you have more on this you are welcome to add to this thread or PM me ( NO PII -- Personally Identifiable Information), if you want to keep info from public glare.

Namaste ji

pk

T

Turbotaxuser1Author

Level 2

Hi Pk Ji,

Thanks for the reply. I meet the thresholds for filing the 8938 and file it for all India accounts, However, this is bonds and the value does not change over time. I want to know which category to report on 8938 - Custodian, Deposit or other accounts? I am guessing it wont be deposit account but need to identify if it is considered Custodian (Part 5) or other account section (Part 6) of the form. If it is part 6, I wonder what is counterparty.

Taxes on interest is already taken care in form 1040

Thanks again

P

pk_

Answer

Level 15

@Turbotaxuser1 , Namaste User1 ji.

As in my earlier note , for purposes of form 8938 / Specified Foreign Financial Assets, a Bond is treated as "other" asset --- ( being similar to a stock in that it is debt owed by the entity but there is no specific share of the value of the entity)-- see here from the instruction for the form ---> page 7 --> Instructions for Form 8938 (Rev. November 2021)

"Other Specified Foreign Financial Assets

Examples of other specified foreign financial assets include the following, if they are held for investment and not held in a financial account.
• Stock issued by a foreign
corporation.
• A capital or profits interest in a
foreign partnership.
• A note, bond, debenture, or other
form of indebtedness issued by a foreign person.
• An interest in a foreign trust or
foreign estate.
• An interest rate swap, currency
swap, basis swap, interest rate cap,
interest rate floor, commodity swap,
equity swap, equity index swap, credit
default swap, or similar agreement
with a foreign counterparty.
• An option or other derivative
instrument with respect to any of
these examples or with respect to any
currency or commodity that is entered
into with a foreign counterparty or
issuer"

Here, Foreign "person", "entity", "counter-party" etc. all mean generally the same things and as applicable.

Since your bond / note is an obligation of a Foreign entity, you treat this as a Specified Foreign Asset under the "OTHER" category PART-II, you report the interest earnings on line 14 (a) --PART-III and details of the asset --PART-VI -- including line 36 --- you are dealing with an issuer ( REC ? ) and not counterparty

Does this more sense ? Is there more I can do for you ?

Namaste ji

pk