Government has amended income tax rules for providing information with regards to financial assets and accounts under the Foreign Account Tax Compliance Act (FATCA) spelling out the timelines and the entities have to comply with the new requirements where it will provide reporting timelines for OECD’s Common Reporting Standard (CRS), which India signed on June 3 this year. The rule defines various terms such as financial assets, financial account, participating and non participating financial institutions among others.
The new FATCA rules, which include 61 pages, prescribe the information to be maintained by the reporting financial institutions in India 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. Though, FATCA reporting has presented short-term challenges for the industry, these rules will provide direction to the industry to upgrade their internal information systems for FATCA reporting and also help them to be complaint.
CBDT rules provide several exclusions in respect of FATCA compliance where the entities that are now excluded for FATCA compliance include Regional Rural Banks, Urban Cooperative Banks, State Cooperative Banks, Local Area Banks, Government pension fund for staff, Gratuity fund and Provident Funds.
The Central Board of Direct Taxes (CBDT) move to notify the rules came just a month after India and US have signed an Inter Governmental Agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA) where the Indian Financial Institution would have to share information about US tax payers to the revenue department which would be passed on to US Internal Revenue Service (IRS). Under the pact, the IRS will provide similar information about Indian account holders in the US, which will be operational from 30 September.