What the form is for
Form 8621 reports your interest in a passive foreign investment company, a PFIC. It is an information return that sits alongside your tax return.
A PFIC is any foreign corporation where 75% or more of gross income is passive, or 50% or more of assets on average produce passive income.
Why an Indian mutual fund is usually caught
Indian funds are not named anywhere in the US statute. They arrive by default.
A foreign vehicle whose investors all have limited liability is treated as a corporation for US tax purposes unless someone elects otherwise. Nobody does that for a retail Indian mutual fund. So it is a foreign corporation earning passive income.
One form per fund, per year
This is the part that surprises people. It is not one form covering your Indian holdings. It is one for each PFIC, and one for each PFIC held inside another one.
A small-holdings exception exists at $25,000 aggregate, or $50,000 filing jointly, but it disappears the moment you sell or take a distribution.
The year never closes until you file
A normal tax year closes after three years. A year in which a required Form 8621 was never filed stays open indefinitely.
So waiting does not help. Old years are not behind you.
What to do next
This page explains a rule. It does not work out what you owe, and it is not US tax advice. Take your fund statements to a US CPA or an Enrolled Agent, because the analysis runs per fund, per year.