INR to USD Conversion: IRS Exchange Rate Rules for H-1B Holders

Every rupee of foreign income you report on your U.S. tax return must be converted to dollars — and the IRS cares which exchange rate you use. This guide walks you through the three official rates, when each one applies, and the mistakes that get H-1B filers into trouble.

Why Exchange Rates Matter for H-1B Filers

If you are on an H-1B visa and a U.S. tax resident, you owe federal income tax on your worldwide income. That includes interest from your NRO account in India, dividends from Indian mutual funds, rental income from a flat in Bangalore, EPF interest credits, and capital gains from selling Indian stocks. All of it.

The IRS requires every foreign-currency amount to be converted to U.S. dollars before it goes onto your return. The conversion is not optional, and neither is the rate. You cannot simply pull today's rate from Google or XE.com — the IRS has specific rules about which rate applies to which type of income, and the rate you use must be defensible if questioned.

Getting this right matters for two reasons. First, it determines how much tax you actually owe. At roughly 84 rupees to the dollar, even small rate differences can shift your reported income by hundreds of dollars when you have significant Indian assets. Second, consistency across forms — Schedule B, Form 1116, Form 8938, and your FBAR — signals to the IRS that your return was prepared carefully. Inconsistency signals the opposite.

Which Exchange Rate to Use

There is no single "correct" INR-to-USD rate. The right rate depends on the type of income or asset you are reporting. Here are the three rates you need to know:

1. IRS Yearly Average Rate — For Recurring Income

The IRS publishes a yearly average exchange rate for dozens of currencies, including the Indian rupee. This is the rate you use for income items that accrue or are received throughout the year — think interest, dividends, monthly rent, and periodic pension credits.

The logic is straightforward: if you earned NRO interest every month across the year, it would be impractical to look up a spot rate for each credit. The yearly average is a single, IRS-approved rate that represents the entire year. It is published on the IRS.gov Yearly Average Currency Exchange Rates page, typically in the first quarter after the tax year ends.

When to use it: NRO/NRE interest, EPF/PPF interest credits, Indian dividend income, monthly rental income, NPS interest accrual, and any income received in a recurring pattern throughout the year.

2. Spot Rate — For Specific Transactions

When a transaction happens on a specific date — you sell mutual fund units on March 15, or receive a lump-sum EPF withdrawal on July 22 — the IRS expects you to use the exchange rate on that date. This is called the "spot rate."

There is no single official source for daily spot rates, but the IRS accepts rates from any consistently applied, reputable source. The U.S. Treasury's reporting rates of exchange, published quarterly, are one such source. Banks' posted rates and financial data providers (Bloomberg, OANDA) are also acceptable — the key is that you use the same source consistently and can document it if asked.

When to use it: Sale of Indian mutual funds or stocks (use the transaction date), lump-sum EPF/PPF withdrawal, sale of Indian property, one-time payments, and any single-date transaction.

3. Treasury End-of-Year Rate — For FBAR Reporting

The FBAR (FinCEN Form 114) has its own rule: you report the maximum account value during the year, converted using the Treasury Department's Financial Management Service rate for December 31 of the reporting year. This is not the same as the IRS yearly average. FinCEN publishes these rates specifically for FBAR purposes.

When to use it: Converting the maximum balance of each foreign account for your FBAR filing.

Where to Find IRS Exchange Rates

Bookmark these two pages — they are the only sources you need:

• IRS Yearly Average Exchange Rates: Search for "IRS yearly average currency exchange rates" on IRS.gov. The page lists rates for dozens of countries, organized by year. For India, you will see the number of rupees per dollar. To convert an INR amount to USD, divide by this number.
• Treasury Reporting Rates of Exchange: Published by the Treasury's Bureau of the Fiscal Service. These quarterly reports include the rates FinCEN uses for FBAR purposes. The December 31 rate is the one you need.

Timing note: IRS yearly average rates for a given tax year are typically published in Q1 of the following year. If you are filing early (before the rate is published), you can use the Treasury spot rate for December 31 as a reasonable proxy, then amend if the final published average differs materially.

Practical Examples for H-1B Filers

Let's walk through five common scenarios. Assume the IRS yearly average rate for the tax year is 84.0 INR per USD, and the Treasury end-of-year rate is 84.5 INR per USD.

NRO Savings Account Interest

Your NRO account earned INR 42,000 in interest over the year (credited quarterly). Since this is recurring income spread across the year, use the IRS yearly average rate.

USD equivalent: 42,000 / 84.0 = $500. Report this on Schedule B and check the "foreign account" box. See our Form 1116 guide for claiming a foreign tax credit on the TDS withheld.

EPF / PPF Interest

Your EPF account was credited INR 1,26,000 in interest for the year. Even though EPF interest is typically credited once a year, it accrues throughout the year on a monthly basis. Use the IRS yearly average rate.

USD equivalent: 1,26,000 / 84.0 = $1,500. This goes on Schedule B as foreign interest income. For the full picture on how EPF and PPF are taxed in the U.S., see our EPF/PPF Tax Guide.

Indian Mutual Fund Sale

You redeemed units of an Indian equity mutual fund on September 10, receiving INR 8,40,000. Because this is a specific transaction on a specific date, use the spot rate on September 10. If the rate that day was 83.8 INR/USD:

USD equivalent: 8,40,000 / 83.8 = $10,024. You will also need the spot rate on the date you purchased the units to calculate your cost basis in USD. The gain or loss is reported on Form 8949 and Schedule D. Note that Indian mutual funds are typically classified as PFICs — if you have not made a mark-to-market election, the tax treatment is significantly different and more punitive.

Indian Rental Income

You collect INR 30,000 per month in rent from a flat in India (INR 3,60,000 for the year). Monthly rent is recurring income, so use the IRS yearly average rate.

USD equivalent: 3,60,000 / 84.0 = $4,286. Report this on Schedule E. You can deduct expenses (maintenance, property tax, insurance) converted at the same yearly average rate. Indian taxes paid on this rental income can be claimed as a foreign tax credit on Form 1116.

FBAR Maximum Account Balance

Your NRO account hit a maximum balance of INR 12,50,000 during the year. For FBAR purposes, use the Treasury end-of-year rate.

USD equivalent: 12,50,000 / 84.5 = $14,793. This goes on your FinCEN 114 as the maximum value for that account.

FATCA vs. FBAR: Rate Differences

Here is a subtlety that even experienced filers miss: FATCA (Form 8938) and the FBAR (FinCEN 114) use different exchange rates for the same accounts.

• Form 8938 (FATCA) uses the IRS yearly average rate or the spot rate on the last day of the tax year, depending on whether you are reporting end-of-year value or maximum value.
• FBAR uses the Treasury Department's end-of-year rate, which is published separately by FinCEN.

These two rates are often close but not identical. For example, the IRS yearly average for 2025 might be 84.0 while the Treasury end-of-year rate is 84.5. This means the same INR 10,00,000 account balance converts to $11,905 on Form 8938 but $11,834 on the FBAR. Both are correct — they are governed by different rules.

Do not try to "reconcile" these numbers. The IRS and FinCEN know the rates differ. Using the wrong rate on either form, however, is a problem.

Recent INR/USD Exchange Rates

For reference, here are recent IRS yearly average rates for India. Always verify against the IRS.gov published rates before filing — the numbers below are approximate.

Important: The tilde (~) indicates an approximation. Always use the actual IRS-published rate when preparing your return. If the rate for your tax year has not yet been published, use the Treasury spot rate for December 31 and consider amending later if the published average differs significantly.

Common Mistakes

These are the conversion errors we see most often in H-1B tax returns:

• Using Google or XE.com rates. These are live market rates, not IRS-approved rates. They change by the second and do not match the yearly average. If the IRS questions your conversion, "I Googled it" is not a defensible answer.
• Using the wrong date's rate. A common mistake is using the conversion rate on the date you file rather than the rate for the tax year or transaction date. If you are filing your 2025 return in March 2026, you need the 2025 rate, not the March 2026 rate.
• Inconsistent rates across forms. Using one rate on Schedule B for your NRO interest and a different rate on Form 8938 for the same account's value creates a visible inconsistency. The IRS expects the yearly average rate to be applied consistently across all income items that use it.
• Multiplying instead of dividing. The IRS publishes rates as "foreign currency per dollar" (e.g., 84 INR = 1 USD). To convert INR to USD, you divide by 84. Multiplying by 84 would turn INR 10,000 into $840,000 instead of $119 — an error that will absolutely trigger a notice.
• Using the FBAR rate on your tax return. The Treasury end-of-year rate is only for FBAR. Your income on Schedule B, Form 1116, and Form 8938 should use the IRS yearly average (or spot rate where applicable).
• Forgetting to convert TDS for the foreign tax credit. When claiming Indian taxes paid on Form 1116, the TDS amount must also be converted to USD using the same rate as the underlying income. If you used the yearly average for the interest, use the yearly average for the TDS too.

How Our Platform Handles This

Currency conversion is baked into every calculation on H1B TaxFile — you never have to look up a rate or do division yourself:

• Automatic rate selection. When you enter Indian income in Step 4 of the wizard, the platform automatically applies the correct IRS yearly average rate for the tax year. For specific transactions (like a mutual fund sale), it uses the spot rate for the date you provide.
• Consistent across forms. The same rate flows through to Schedule B, Form 1116, Form 8938, and every other form that references the converted amount. No inconsistencies, no mismatches.
• FBAR rate separation. If you indicate FBAR-reportable accounts, the platform notes the Treasury end-of-year rate for your reference — kept separate from the income conversion rate so you do not accidentally mix them.
• TDS conversion included. When you enter TDS withheld on Indian income, the platform converts it to USD at the matching rate and flows it directly into Form 1116 for your foreign tax credit.
• Rate documentation. Your generated PDF package includes a summary of the exchange rates used, so you have a clear record if the IRS ever asks how you arrived at your numbers.