The foreign account compliance tax account (FATCA) is the tax mechanism that compels U.S. citizens at home or abroad to disclose all their foreign account holdings while filing their annual reports. This act was enforced in 2010 in the U.S.A as a part of the Hiring Incentives to Restore

Employment ACT. (HIRE). FATCA was enforced to eliminate tax evasions for American citizens who are earning income from the U.S.A. by residing abroad.

FATCA enables financial institutions to withhold tax if U.S. persons fail to meet the documentation requirements. All the financial and non-financial institutions registered under this Act have to report to the U.S. tax department about all such account holders of persons who try to evade their tax liability.

Business Acronym FATCA as Foreign Account Tax Compliance Act

US- INDIA Agreement

In 2014 Indian Government vide Notification No. 62 of 2015 have inserted Rules 114F and 114H and form 61B in Income tax act,2014with an objective of providing a legal base for setting up standards for financial institutions to report and maintain information about the reportable Account.

The government had also signed Inter-Governmental Agreement (IGA) with the United States in 2015 for the implementation of FATCA.

According to this agreement US investors have to disclose specific accounting information which filing their IT returns. The goal was to ensure tax compliance by the US citizens while increasing transparency in their Internal Revenue services (IRS).

INFORMATION REQUIRED TO BE DISCLOSED BY FOREIGN CITIZENS

With effect from January 2016 it is mandatory for all Indian investors and NRI investors to file a FATCA- self-declaration form which contains the following information

(i) Name

(ii) PAN number

(iii) Address

(iv) Place / country of birth

(v) Nationality

(vi) Gross turnover

(vii) Occupation

(viii) In case of nonresident country of residence, tax ID number and types

COMMON REPORTING STANDARD OR CRS

Common Reporting Standard or CRS was developed by Organisations for Economic and Cooperation Development (OECD) for Automatic Exchange Of Information (AEOI). CRS mandated financial institutions to provide information to respective tax authorities about their foreign holdings. India has signed a multilateral agreement to transfer information relating to personal and account information of foreigners to their respective tax authority

PROCESS OF REPORTING UNDER FATCA AND CRS

1. Identifying all the existing Reporting Financial institutions (RFI)

2. Review of all their financial accounts

3. Identifying the Reportable account by applying due diligence rules

4. Report the relevant information in respect of identified Reportable Accounts in Form 61B.

DOCUMENTS REQUIRED TO BE FILED FOR FATCA AND CRS DECLARATION

All foreign financial institutions mandated US citizens to submit the following documents namely

(i) PAN Card

(ii) Passport

(iii) Voter IDS or Aaadhar cards

PENALTY

If any person fails to comply with the disclosures under the FATCA act, will he be held liable to pay a penalty of $10,000 It imposes an automatic 30% withholding tax on U.S. source payments such as interest and dividends

-Author- CA.Madhuri Marne

Author Bio

Qualification: Other
Company: Taxblock india Pvt.Ltd
Location: PUNE, Maharashtra, India
Member Since: 24 Jun 2021 | Total Posts: 39
Taxblock India Private Limited, founded in 2019, is a fintech startup located in Pune, Maharashtra. We are enrolled as an E-Return Intermediary with Income Tax Department & have established an In-House team of Technology & Tax Experts to build a “Financial Compliance Ecosystem” for Indi View Full Profile

My Published Posts

More Under Income Tax

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

September 2021
M T W T F S S
 12345
6789101112
13141516171819
20212223242526
27282930