A month after signing the tax information sharing agreement under the Foreign Account Tax Compliance Act (FATCA) with the US, the revenue department of India has amended income tax rules to provide for reporting of information with regards to financial assets and accounts.
- As per the latest amendment, the financial Institutions should maintain detailed information of the each individual including – Name, Address, date, place of birth and taxpayer identification number (assigned to the account holder by the country or territory of his residence for tax purposes) of each reportable person.
- The rules also define various terms such as financial asset, financial account, excluded accounts, participating and non-participating financial institutions, among others. Furthermore, the rules prescribe reporting requirements on a staggered basis starting from 2014 and reporting of all details prescribed from 2017 onwards.
History behind FATCA:
- FATCA was signed with the US on July 9th which will enable automatic exchange of financial information between the two nations about tax evaders from September 30.
- As per the agreement it is mandatory for India to share information about US tax payers with the US Internal Revenue Service (IRS), in return it will be mandatory for US to share similar kind of financial information of Indian Financial Institutions and individuals with India’s Revenue Department.
This will promote transparency on tax matters, enhance accountability and curb offshore tax evasion by exchange of information between the two countries and will also help to detect and discourage offshore tax evasion mutually.