Central Board of Direct Taxes (CBDT) today issued guidance notes on implementation of reporting requirements for the US law FATCA.
Under Foreign Account Tax Compliance Act (FATCA), foreign financial institutions that fail to give information about their American clients to US authorities would face 30 per cent withholding tax.
"The provisions of FATCA essentially provide for 30 per cent withholding tax on US source payments made to foreign financial institutions (FIs) unless they enter into agreement with Internal Revenue Service (IRS) to provide information about accounts held with them by USA persons or entities controlled by USA persons," CBDT said.
The Inter-Governmental Agreement (IGA) between India and US, signed as part of FATCA implementation, requires the Indian FIs to provide necessary information to Indian tax authorities, which will then be transmitted to the US automatically.
The information related to calendar year 2015 needs to be reported for only US reportable accounts. The statement was to be furnished by August 31, however the CBDT extended the date to September 10.
The information related to calendar year 2015 also needs to be reported for only US reportable accounts and the statement should be furnished by May 31, 2016.
"For calendar years 2015 and 2016, in the case of any account held by a non-participating financial institution, the name of each non-participating financial institutions to whom payments have been made and the aggregate amount of such payments need to be reported," the guidelines said.
For calendar years 2016 onwards, all the required information in case of both US and other reportable accounts need to be reported.
Earlier regulator Sebi asked market entities to ensure compliance with changed income tax regulations, with India becoming a signatory to FATCA as well as a global pact to check tax evasion.
The Reserve Bank has also asked all banks and financial institutions to be prepared for the implementation of due diligence and reporting standards under FATCA and CRS meant for international tax compliance.
To combat offshore tax evasion and avoidance and stashing of unaccounted money abroad requiring cooperation amongst tax authorities, the G20 and OECD countries have developed a Common Reporting Standard (CRS) on Automatic Exchange of Information ( AEOI).
The CBDT's guidance notes are also for CRS.
In keeping with its leadership role in developing the new global standards, India is one of the early adopters of the CRS and has committed to exchange information automatically by 2017.