The Central Board of Direct Taxes (CBDT) has amended income tax rules to provide reporting of information with regards to financial assets and accounts to comply with Foreign Account Tax Compliance Act (FATCA) pact signed between India and US in 9 July 2015.
As per notification:
- The financial Institutions should maintained information of the each individual in Financial Institutions like – Name, Address, date and place of birth, TIN number of each reportable person.
- It must maintain information regarding financial account and assets, participating and non-participating financial institutions and excluded accounts among others.
- It must report the requirements starting from 2014 and report of all details from 2017 onwards.
- Financial Institutions in India and US shall begin reporting information of each other clients from September 30.
India on 9 July 2015, signed Inter Governmental Agreement (IGA) with the US under FATCA which seeks to facilitate flow of financial information between two countries.
As per the agreement it is mandatory for India to share information about US tax payers with the US Internal Revenue Service (IRS), in return it will be mandatory for US to share similar kind of financial information of India Financial Institution ans individuals with India’s Revenue Department.
- The agreement will promote transparency on tax matters and curb offshore tax evasion by exchange of information between the two countries.
- It will help to detect and discourage offshore tax evasion mutually.
- Indian financial institutions will not have to bother of inking the agreement individually with the US.
- Competitiveness of India companies like SBI & ICICI in US will increase.
Note: Only US FFIs will have to face higher withholding tax rate of 30% on payments not India FFIs if they fails to provide financial account information of US taxpayers and Entities in foreign land.