Source: News Bharati English12 Apr 2017 11:00:54
New Delhi, April 12: The bank accounts opened between from 1 July 2014 to 31 August 2015 will have to compulsorily submit Know Your Customers KYC details and their Aadhar numbers to the banks and financial institutions by 30th April and self-certify to comply with FATCA (Foreign Account Tax Compliance Act). "The account holders may be informed that, in case self-certifications are not provided till April 30, 2017, the accounts would be blocked, which would mean that the financial institution would prohibit the account holder from effecting any transaction with respect to such accounts," the Central Board of Direct Taxes or CBDT said in a statement. If norms under the Foreign Account Tax Compliance Act (FATCA) are violated, these accounts will be blocked till the self-certification is received.
“Newer accounts already have know-your-customer norms,” said Rakesh Nangia, managing partner Nangia & Co. The Income Tax department had on August 31, 2016, indefinitely extended the deadline for complying with the self-certification norm.
What is FATCA (Foreign Account Tax Compliance Act)?
In July 2015, India and the US signed a tax information sharing agreement under a new US law, FATCA, aimed at bolstering efforts for automatic exchange of financial information between the two nations about tax evaders. The FATCA was the revenue-raising portion of the 2010 domestic jobs stimulus bill, the Hiring Incentives to Restore Employment (HIRE) Act.
The Foreign Account Tax Compliance Act (FATCA) of the US makes it mandatory for overseas financial institutions to give information about non-resident US account holders or face withholding tax. India had entered into an agreement with the US for implementation of FATCA with effect from August 31, 2015.Financial institutions in India are required to give this information to CBDT, which in turn gives it to US authorities.
Features of FATCA:
- FATCA allows an automatic exchange of financial information between India and the US.
- Investors are required to provide details such as country of tax residence, tax identification number from such country, country of birth, country of citizenship etc.
- If the accounts are blocked due to lack of self-certification, then transactions by the account holder in such blocked accounts will be permitted once the self-certification is obtained and due diligence is completed, the tax department said.
- Mutual funds and other financial institutions had also asked customers to comply with the new norms.
- The purpose of FATCA is aimed at ensuring that individuals pay tax on income generated from their wealth parked overseas.
- FATCA obliges such banks and financial institutions to report such information about citizens having accounts with them.