New Delhi: The Revenue Department has amended income tax rules to provide for reporting of information with regards to financial assets and accounts, a month after India signed a tax information sharing agreement with the US. On July 9, India and the US signed tax agreement under the Foreign Account Tax Compliance Act (FATCA) that will enable automatic exchange of financial information between the two nations about tax evaders from September 30.
The rules define various terms such as financial asset, financial account, excluded accounts, participating and non-participating financial institutions, among others. The norms prescribe information to be maintained by the reporting financial institution such as name, address, taxpayer identification number (assigned to the account holder by the country or territory of his residence for tax purposes) and date and place of birth (in the case of an individual) of each reportable person.
The rules prescribe reporting requirements on a staggered basis starting from earlier year 2014 and reporting of all details prescribed from calendar year 2017 onwards. They also specify due diligence procedure for identifying reportable account and various forms. "Though FATCA reporting has presented short-term challenges for the industry, the rules will provide much needed guidance to the industry to upgrade their internal information systems for FATCA reporting and help them be compliant," said Amit Maheshwari, Partner Ashok Maheshwary and Associates.
Bahroze Kamdin, Partner, Deloitte Haskins and Sells LLP said the FATCA rules "luciently" provide for the definitions of various terminology, the information to be maintained and reported and the due diligence process to be followed for identifying preexisting and new accounts. "India is the first country to have come out with joint rules for FATCA and the OECD CRS," Kamdin said and added, the methodical approach will help financial institutions meet the strict timelines.
After signing of FATCA, beginning September 30, banks, mutual funds, insurance, pension and stock-broking firms will report their Indian client details to the United States which will be shared with New Delhi. Indian entities will do a reciprocal information sharing about Americans. The FATCA agreement would "enhance tax transparency and accountability in matters of financial reporting and payment of taxes which are legitimately due to various governments," Revenue Secretary Shaktikanta Das had said.
