New Delhi: India on March 18 decided to sign an agreement with the US on a tax compliance act that will enable exchange of information on cases of tax avoidance through overseas entities. The agreement on the Foreign Account Compliance Act (FATCA) would also ensure that Indian corporates would not have to pay 30 per cent withholding tax on their US income.
A meeting of the Union Cabinet, chaired by Prime Minister Narendra Modi, approved signing of an Inter-Governmental Agreement (IGA) between India and the US for implementation of the FATCA.
FATCA is a US law, which seeks to facilitate flow of financial information. It was also decided to join the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Information (AEOI).
Sources said decision will enable Indian authorities to receive information from the US and from other jurisdictions with which India has entered into an agreement for AEOI about the assets of Indians held abroad including through entities in which Indians are beneficial owners.
It will also result in Financial Institutions in India being FATCA compliant and they will not be required to enter into separate agreements with the US to avoid 30 per cent withholding on their US income.
India took a leading role in international fora, including at G20, Global Forum for Transparency and Exchange of Information for Tax Purposes and OECD, towards building an international consensus amongst major economies of the world that the problem of offshore tax evasion and flow of illicit money can be addressed.
The Prime Minister, during the G20 leaders summit on November 16, 2014 in Brisbane, strongly supported AEOI and stated that this would be instrumental in getting information about unaccounted money hoarded and enable its eventual repatriation. Till now, 52 countries all over the world have signed the MCAA on AEOI and many more countries are going to sign the MCAA.
