FATCA to promote tax transparency between India and US
Hyderabad: Customers of several public and private sector banks across the Telangana and Andhra Pradesh are finding fault with their bankers for asking to fill up more forms under Foreign Account Tax Compliance Act (FATCA), and Common Reporting Standard (CRS).
The new rules have come into effect from November 1, 2015 following an inter-Government Agreement (IGA) signed between India and the United States (US) on July 8, 2015. The agreement provides for implementation of the FATCA/CRS in India. This is part of joint agreement between India and USA to promote tranparency between two countries on tax matters. This is seen as an important step to tackle offshore tax evasion and avoidance. Financial institutions in India will be required to report tax related information relating to U.S. account holders directly to the Indian Government, which will, in turn, relay that information to the U.S.A. The U.S.A. will provide similar information relating to Indian account holders in the U.S, although the exchange of information is not fully reciprocal at present.
Following the new rules coming into force, now the bankers are asking their customers a new self-declaration form to comply with the requirements ofFATCA. As part of this, the bankers takeFATCA self-declaration forms from all prospective and existing customers. And, the banks are collecting self-declarations when they give services like opening a new bank account, new term deposit or recurring deposit and extending loans, issue of credit cards, mutual funds, life insurance, general insurance, foreign exchange transactions and the like.
However, majority of the customers are reportedly not aware of the new rules coming into force and that they will have to a declaration. Raising the issue, Sumit Agarwal, working in a software firm from Hyderabad questions the rationale of customers of an Indian bank asked to comply with FATCA. “I have no idea about what it is all about. Being an Indian citizen why should I comply with a foreign law? Also, I do not deal with anyone other than those living in India, when it comes to financial transactions. Then, why should I comply with FATCA? , he questions.
Similar is the case with a farmer Satyanarayana from West Godavari district. My sister’s son is in USA. Sometimes he does send us money. “Since you are a beneficiary of a foreign bank account holder and since he transfers monies from his account in USA,. It is for this reason that the bank staff told me to give a declaration,” he said.
Pitching in D Tejeswara Rao, a teacher from Visakhapatnam said, “I inquired even with the bank manager. But, he himself is not aware of anything about FATCA, and asked me go meet an auditor, or an income tax practitioners,” he added.
Admitting it is turning into a herculean tax for the staff to explain, senior official from the public sector State Bank of Hyderabad said, “except a very few none of the customers are aware of the new rules coming into force, “ he added.
