Foreign Account Tax Compliance Act (FATCA): All You Need To Know
Foreign Account Tax Compliance Act (FATCA) has been made mandatory for the Investors and Bank holders alike from 1st May 2017 in India. FATCA is an anti tax evasion agreement signed between United States and India which is effective from 31st August 2015. FACTA regulation is aimed at curbing tax evasion practices and bringing uniformity in Global Tax compliance.
India had entered into an agreement with the United States for implementation of FATCA with effect from 31st August 2015.
Bank Account holders as well as Mutual Fund investors need to comply with the regulation and have to submit the FATCA Declaration form to their respective Bank Branch and Financial investment intermediaries.
How does FATCA Impact?
FATCA facilitates automatic exchange of financial information between India and United States. The purpose of the regulation is curb tax evasion practices along with identification of US nationals vesting their wealth in India and vice versa. This would bring about transparency in the financial dealings and curb the malpractices.
Disclosure of financial transaction among Nations will help in checking irregularities which would discourage tax evaders to adopt such practices.
Mutual Fund Investors not complying with the norms may not be able to redeem the investment unless their account is FATCA compliant, while Bank Account holders may also face similar issues going forward. Although the Investment in Mutual Funds through SIP will continue to as usual.
Bank Accounts may be temporarily inoperative till they become FATCA compliant.
Who Needs To Comply under FATCA?
Bank Accounts holders, Mutual Fund Investors and National Pension Scheme (NPS) Subscribers need to comply under the FATCA regulation.
However, PFRDA the NPS regulatory body has confirmed that the accounts would not be blocked for non compliance.
How to be FATCA Compliant?
FATCA Compliance is simple. One needs to download FATCA/CRS Self Certification Form which is available on the Mutual Fund company websites or at regional branches of your Financial Institutions. The form needs to be duly signed and submitted along with relevant documents.
New account holders or investors in Mutual Funds will be required to submit the FATCA Self Certification along with KYC documents.
FATCA for National Pension Scheme (NPS)?
PFRDA has clarified that NPS subscribers account will not be blocked for not being FATCA compliant. However, the FATCA Self Certification Form is available on the NPS portal which needs to be duly filled and submitted along with other relevant documents to CRA (Central Recordkeeping Agency).
Please refer to the link shared below: