Is the interest on an FCNR deposit taxable in India, and how is it taxed in the US?

FCNR (Foreign Currency Non-Resident) deposits are held in foreign currency like US dollars, and the interest is tax-free in India for as long as you remain a non-resident under the Income Tax Act. That's a genuine India-side advantage. However, if you are a US tax resident, the IRS taxes your worldwide income, so that FCNR interest is fully taxable on your US return as ordinary interest income even though India doesn't tax it. There's no foreign tax credit to claim because India withheld nothing. Many NRIs are surprised the 'tax-free' label only applies in India. Report the interest on Schedule B, and remember the account counts toward your FBAR and possibly Form 8938 thresholds.