The Income tax department on Tuesday directed the banks to obtain self-certification from customers and carry out due diligence in respect of all individual and entity accounts opened from July 1, 2014 to August 31, 2015 to comply with FATCA(Bank Accounts) provisions.
The I-T department said if the self-certification is not complete by April 30, 2017 then the accounts would be blocked. This would mean that the financial institution would prohibit the account holder from effecting any transaction with respect to such accounts.
“The Inter-Governmental Agreement (IGA) with USA for implementation of FATCA entered into force on 31st August 2015. Under the alternative procedure provided in Rule 114H(8) of the Income-tax Rules, 1962, the financial institutions need to obtain self-certification and carry out due diligence in respect of all individual and entity accounts opened from 1st July 2014 to 31st August 2015.
Such self-certification and documentation was required to be obtained by the financial institutions by 31st August 2016, otherwise they were required to close the accounts and report the same if found to be a “reportable account” as per the prescribed due diligence procedure for preexisting account,” the tax department’s press release said.
Here are 10 things a customer should know about the I-T FATCA (Bank Account) provisions:
1) FATCA allows automatic exchange of financial information between India and the US.
2) India had entered into an agreement with the United States for implementation of the Foreign Accounts Tax Compliance Act (FATCA) with effect from August 31, 2015.
3) Investors are required to provide details such as country of tax residence, tax identification number from such country, country of birth, country of citizenship etc.
4) If the accounts are blocked due to lack of self-certification, then transactions by the account holder in such blocked accounts will be permitted once the self-certification is obtained and due diligence is completed, the tax department said.
5) Earlier, the financial institutions had to obtain self-certification from account holders by August 31, 2016, in respect of all individual and entity accounts opened from July 1, 2014-August 31, 2015.
6) Mutual funds and other financial institutions had also asked customers to comply with the new norms.
7) In view of the difficulties faced by stakeholders, the tax department had on August 31, 2016, extended the deadline for complying with self-certification norms.
8) The financial institutions were advised to continue to work on completing the required due diligence, including obtaining self-certifications.
9) The purpose of FATCA is aimed at ensuring that individuals pay tax on income generated from their wealth parked overseas.
10) FATCA obliges such banks and financial institutions to report such information about citizens having accounts with them.