The Foreign Account Tax Compliance Act (FATCA) is a legislation put in place by the United States Government. Its purpose is to ensure that foreign financial institutions provide the US government with information about clients who could be subject to American Tax laws.
Why FATCA is required?
The FATCA is an agreement which is signed between the US Government and Indian Government to report assets and income held by citizens of the US in offshore accounts. FATCA, which was signed between India and the US works to find the deliberate tax evasion carried out by US citizens or residents in offshore accounts which is illegal as against tax avoidance which is legal in the US.
The agreement between India and USA was signed between the two countries on July 9, 2015, and the initial deadline for all the aforementioned account holders to get the compliance done was August, 2016 which was later extended to April 30, 2017, to give people more time to adapt.
FATCA with Regard to Indian Government
Indian institutions geared up and started working on different modules and at last finalized. Finally, Indian Government will have to sign up with the Internal Revenue Service (IRS) for this purpose and therefore, done with it. They obtained a Global Intermediary Identification Number (GIIN), according to a regulatory circular. Thereby, have to report the assets of such clients to the IRS.
What’s new on FATCA?
According to the new norm being imposed by the Indian banking system from May 1, 2017, all bank account holders, mutual funds, and insurance scheme investors are expected to compulsorily get their Foreign Account Tax Compliance Act (FATCA) compliance done or their accounts would be frozen.
What happens if a person not done with FATCA compliance?
If one fails to get FATCA compliance done by April 30, 2017 (Sunday), any of his bank, mutual funds, or insurance investment accounts opened between the afore mentioned dates will be frozen, which means you will not be allowed to carry out any transactions from those accounts even if there is money in it.
As for mutual fund account holders, the investors will not be able to access the amount already invested in funds or carry out any new investments.
How to file FATCA details?
- FATCA details can be filed using a self certification form that is available with the mutual fund company’s website, can also be done at all service centers / Asset Management Companies (AMCs)
- One can use either offline or online mode to submit their FATCA form details.
- For physical submission, one needs to duly sign the FATCA form along with copies of necessary and relevant documents and submit the same at the nearest AMC branch.
- Alternatively, one can approach their Registrar and Transfer Agent (R&T) for online submission, where PAN card is used to generate a one-time password sent on to a person’s registered mobile or email.
What information is required for FATCA filing?
To file a FATCA form, the following information and documents would be required:
- Name & Demographic Information
- Place of Birth
- Income Details
- Net worth Details
- Tax Identification Number(s)
- Passport Details
- Elections / Voters ID
- Aadhaar Card
- Any other government issued ID card.
- If taxpayer identification document is not available, an explanation of the same needs to be enclosed.