US 529 Plan reporting and taxation in ITR-2/3 as ROR

Income Tax
1

Hi,

As US Citizen + ROR in India, I have the following questions regarding 529 plan:

I have an US 529 plan (beneficiary is minor child) that only reports the post-tax principal invested and doesnt report dividends or capgain. Any such transactions + market value gain/loss are included with unrealized earnings until any funds are withdrawn. At withdrawal, the proportion of principal divided-by totalbalance is used to determine the ratio of principal vs earnings to be withdrawn. At this withdrawal, the portion of earnings withdrawn is realized and either is non-taxable for qualified withdrawal events or taxable for non-qualified withdrawal events.

Example:

On Sep 30 2024

Balance:
Principal=60
Earnings=15 (dividend+ capgain + market change)

On Dec 31 2024

Balance:
Principal=60
Earnings=40 (dividend + capgain + market change)

On Jan 1 2025

Withdraw 50:
principal 30 + earnings 20 (US 1099-Q box2 doesnt distinguish between dividend or capgains)

Balance:
Principal=30
Earnings=20 (dividend + capgain + market change)

On Mar 31 2025

Balance:
Principal=30
Earnings=5 (dividend + capgain + market change) <= decreased due to market change

Questions:

  1. I assume 529 plan is reported on FA, but which table ?

  2. If there are no FY withdrawals, is the unrealized gain taxable in India ? If not, do we still declare the amount in Sch OS and claim as exempt in Sch EI ?

  3. If there are FY withdrawals, then is the principal amount taxable in India (this would become double tax since the principal is post-tax contribution) or only earnings from box 2 of 1099-Q

  4. If there are FY withdrawals, then is the earnings amount reportable in Sch OS or CG - since at the time of withdrawal there is no separation between dividend and capgain reported.

  5. Does India honor qualified vs unqualified 529 withdrawals. if not, how to use the India tax paid credit back in US tax filings and against what kind of income. If qualified 529 withdrawal, there isnt any US tax.

  6. Are the individual equities in the 529 reportable in FA table A3 ? If yes, is it per lot (each equity lot is per 2 weeks over last 10 years - so roughly 250 transactions per equity)

  7. Assume Sch.AL filing criteria is met, In Sch. AL, 529 plan is accounted towards which sub-category of “Financial Assets”

  8. How is Form 67 filled for this type of account ?

Thank you for your clarifications

2

@TeamQuicko @Priyanshu_Agarwal
any guidance please ?

3

Hello @shivs

Let me answer one by one:

  1. If you are a resident of India then you report the foreign assets owned in the Schedule FA in Table D
  2. Unrealized gain are not taxable in India only realized gains are taxable.
  3. No since the tax on principal amount is only taxed in the US, so you can claim relief of such tax paid as DTAA.
  4. The earnings should be reported under the Schedule OS
  5. Report your total value of financial interest in the plan no need to report lot wise
  6. It should be reported under the “other financial assets” under the Schedule AL
  7. You need to include details such as nature of income, country and tax certificate etc. before ITR filing to claim the foreign tax credit.
    Hope this helps!!