As per a new financial norm, all bank accounts opened between July 1, 2014 and August 31, 2015, as well as investments made during this period in mutual funds and Insurance schemes will freeze if FATCA compliance has been not filed by April 30, 2017.
- FATCA compliance is basically a ‘self-declaration’ to provide details about account holder’s tax residency to the financial entity.
Abbreviation FATCA stands for Foreign Account Tax Compliance Act.
- It is an agreement signed between India and United States (US), which came into effect on August 31, 2015.
- FATCA agreement helps US tax authorities to trace income held by US citizens in foreign countries and thereby curtail deliberate attempts of tax evasion.
- Under FATCA agreement, Indian financial institutions obtain self certification from their clients to determine their tax residency. Due diligence for determining the authenticity of such declarations is also carried out.
- Indian Financial institutions give this information to Central Board of Direct Taxes (CBDT), which in turn passes it to US tax authorities.
- The initial deadline to file FATCA compliance was August 31, 2016, which was later extended up to April 30, 2017.
Implications for not filing FATCA compliance:
For Bank Account Holders: Financial institution will freeze such accounts for which FATCA compliance has not been received till April 30, 2017. The account holders will not be able to carry out any withdrawal or deposit transactions through online or off-line mode. Even auto-debit requests will be dishonoured.
For Mutual Fund and Insurance Investors: The investors will not be able to purchase new units, nor will they be able to redeem their investments if the FATCA compliance has not been filed.
Details required for filing FATCA Compliance:
- Permanent Account Number (PAN) details
- Country of Birth
- Country of Residence
- Gross Annual Income
- Details of Political Connections
FATCA compliance is mandatory for individual as well as non-individual account holders and investors.