Guidance Note on FATCA and CRS as updated on 31.05.2016

GOVERNMENT OF INDIA

MINISTRY OF FINANCE

DEPARTMENT OF REVENUE

CENTRAL BOARD OF DIRECT TAXES

FOREIGN TAX & TAX RESEARCH DIVISION

The use of offshore financial accounts for tax evasion and avoidance is a pressing concern for governments all around the world. There is an international consensus that the domestic measures taken to address this problem must be supplemented by enhanced cooperation amongst governments including exchange of tax information on automatic basis. India has taken a leadership role in this area.

India has joined Multilateral Competent Authority Agreement to implement Automatic Exchange of Information based on Common Reporting System (CRS) and is one of the ‘early adopters’ to the international standard on automatic exchange of information. From the year 2017, 56 countries including India, will start sharing tax information on automatic basis and the number will increase to more than 100 in the year 2018. India has also signed Inter-Governmental Agreement (IGA) with the USA for implementing the Foreign Account Tax Compliance Act (FATCA) enacted by the USA. These developments will enable the Indian tax authorities to automatically receive information of Indian residents who have stashed assets in foreign participating jurisdictions. This exchange of information is reciprocal and India also needs to provide information to other participating jurisdictions about their residents holding assets in India.

For implementation of FATCA and CRS in India, necessary legislative changes have been carried out in the Income-tax Act, 1961 and the Income-tax Rules, 1962 so as to collect and provide relevant information to the foreign tax authorities. A Guidance Note for the purpose of providing guidance to the Financial Institutions, Regulators and officers of the Income Tax Department was issued on 31.08.2015. This was subsequently updated on 31.12.2015. I am happy that third version of Guidance Note is now ready for release. This version incorporates further clarifications that were issued on 19.02.2016 & 26.05.2016 and also includes the updated procedure for registration and submission of reports by the financial institutions.

Guidance Note will help financial institutions and officers of the Income Tax Department in implementing FATCA and CRS in its true spirit. This will not only ensure that India fulfills its commitment made to the international community for sharing financial account information on automatic basis but also boost the efforts made by Government of India to fight the menace of black money stashed in foreign jurisdictions.

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