All you need to know about FATCA compliance
With increasing number of people from multiple countries investing in India and vice versa, there is a need to have a system that could track all such financial transactions in a transparent manner.
With increasing number of people from multiple countries investing in India and vice versa, there is a need to have a system that could track all such financial transactions in a transparent manner. In order to enable an automatic and seamless exchange of financial data between countries, India has entered into an Inter-Governmental Agreement with the US.
As per this agreement, every Indian investor needs to provide an additional KYC and compliance form, apart from the regular KYC information, at the time of operating any financial or investment account.
Here is a look what investors need to be aware about FATCA compliance:
What is FATCA compliance?
India has signed an agreement called the Inter-Governmental Agreement (IGA) with the US last year for automated exchange of information between the two countries. This initiative is for improving the International Tax Compliance and implementing the Foreign Account Tax Compliance Act (FATCA).
FATCA is a law that is aimed at ensuring that all individuals pay on income generated from their wealth parked overseas. India has also signed a multilateral agreement last year to automatically exchange information based on the Convention on Mutual Administrative Assistance in Tax Matters under the Common Reporting Standard (CRS) or the Standard for Automatic Exchange of Financial Account Information (AEoI). Financial institutions have to provide an additional investor information to the government as per these agreements.
Who needs to fill in FATCA/CRS compliance form
From January 2016 onwards, all Indian investors, including new and existing investors who are planning to make fresh purchases of mutual fund units or other investments like FD, will need to file a supplementary FATCA/CRS self certification form to comply with this additional KYC requirement.
How to file FATCA/CRS details
FATCA/CRS details can be filed using a self certification form that is available with the mutual fund company’s website, as well as at all service centers/Asset Management Companies (AMCs). You can use either offline or online mode to submit your FATCA form details. For physical submission, you need to duly sign the FATCA/CRS form along with copies of necessary and relevant documents and submit the same in your nearest AMC branch.
Alternatively, you can approach your Registrar and Transfer Agent (R&T) for online submission, where your PAN card is used to generate a one-time password sent on your registered mobile or email.
What you need to fill in the form
The form calls for details like your tax residency status in India, and documents supporting it, such as documents stating your place of birth, occupation, income details, your overall net worth, and tax identification number (for investors from other countries). Therefore, in addition to your PAN card, documents like passport, election ID card, Aadhaar card, or any other government issued ID card is required separately to be filed for this. If the tax-payer identification document is not available, an explanation of the same needs to be enclosed.
FATCA/CRS compliance form submission
FATCA/CRS is not limited to Indian residents and you need to file information under the FATCA/CRS guidelines even if you are a NRI investor. All joint investment account holders, including any power of attorney holders and guardians of minors also need to attach their FATCA/CRS certifications. All disclosures that you make in the FATCA and CRS certificates should be made in Indian currency only.
FATCA guidelines have been in place since September 30, 2015 and are a step towards making the exchange of information and taxation easy for all. Soon, properties held by NRIs in India will also come under FATCA.
