What is the PFIC tax regime and why does it punish US residents who own Indian mutual funds?

A PFIC (Passive Foreign Investment Company) is essentially any non-US pooled investment fund — and almost every Indian mutual fund, ETF, and ULIP qualifies. Once you become a US tax resident, the IRS treats these holdings under a punitive default regime called the "excess distribution" method. Gains and certain distributions get spread back over your holding period, taxed at the highest ordinary rate for each year, then hit with a daily compounding interest charge for "deferral." The result can exceed 50% of your gain. On top of that, each PFIC requires its own Form 8621, and the paperwork is brutal. The core takeaway: holding Indian mutual funds while living in the US is one of the most expensive unforced errors NRIs make. Before you move, map out every foreign fund you own. See wealthserene.com/for/immigrant-nri.