Your bank account and other financial transactions like mutual funds need to be compliant with The Foreign Account Tax Compliance Act (FATCA). Non-compliance would lead to blocking of accounts.
What is FATCA?
The Foreign Account Tax Compliance Act (FATCA) is a United States federal law that requires United States persons, including U.S. citizens who live outside the United States, to report their financial accounts held outside of the U.S., and requires foreign financial institutions to report to the Internal Revenue Service (IRS) about their U.S. clients.
Why is FATCA compliance necessary in India?
India had signed an agreement with the U.S. on July 9, 2015 which enables automatic exchange of financial information between India and the U.S. The agreement provides that Indian Financial Institutions will provide the necessary information to the Indian tax authority i.e. Central Board of Direct Taxes (CBDT), which information will then be transmitted to the U.S. automatically in the case of FATCA. The agreement came into effect on August 31, 2015.
Which financial transactions need FATCA compliance?
The compliance is needed for bank accounts, mutual fund, national pension scheme and other such transactions. The compliance is needed to be done for all individual and entity accounts opened from July 1, 2014 to August 31, 2015.
What do you need to submit to be FATCA compliant and how can it be done?
Individuals and entities need to provide details of their country of birth, country of citizenship, country of residence for tax purposes, among others, to the respective financial institutions. The self certification can be done online for bank accounts and mutual funds. The Pension Fund Regulatory and Development Authority has said it would come out with revised guidelines on FATCA shortly.
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What will happen if I am not FATCA compliant?
In a press statement issued on April 11, 2017, the Finance Ministry said the process should be completed by April 30, 2017; otherwise the transactions would be blocked in the accounts for the said period. However, experts point out that on ground, the accounts have not been blocked; even if they have been, one can still provide self certification and unblock the accounts.
