{"id":1159,"date":"2015-04-09T10:56:53","date_gmt":"2015-04-09T15:56:53","guid":{"rendered":"http:\/\/www.patellawoffices.com\/blog\/?p=1159"},"modified":"2015-04-09T10:56:53","modified_gmt":"2015-04-09T15:56:53","slug":"beware-india-to-sign-fatca-agreement-with-us-for-sharing-of-information","status":"publish","type":"post","link":"https:\/\/patellawoffices.com\/blog\/planning-for-tax-minimization\/beware-india-to-sign-fatca-agreement-with-us-for-sharing-of-information\/","title":{"rendered":"Beware: India to sign FATCA agreement with US for sharing of information"},"content":{"rendered":"

Earlier this week, the Indian Cabinet, chaired by Prime Minister\u00a0Narendra Modi, approved signing of an Inter-Governmental Agreement (IGA) between India and the U.S. for implementation of the U.S. Foreign Account Tax Compliance Act (FATCA).<\/p>\n

Indian Finance Minister Arun Jaitley this week said India was not a tax haven and that taxes that were payable by foreign investors should be paid. The era of Indian information sharing and cooperation has begun. This is a major development for Indian financial institutions and U.S. persons with assets in India.<\/p>\n

FATCA is a U.S. law which seeks to facilitate flow of financial information. FATCA<\/a>\u00a0requires Indian banks to reveal account information of persons connected to the U.S. \u00a0Non-compliant financial institutions could be frozen out of U.S. markets and subjected to punitive withholding taxes.<\/p>\n

Foreign financial institutions (FFIs) in India, i.e. an insurance company, bank, or mutual fund, would be required to report all\u00a0FATCA<\/a>-related information to Indian governmental agencies, which would then report these information to Internal Revenue Service (IRS).\u00a0 Foreign Financial Institutions must report account numbers, balances, names, addresses, and U.S. identification numbers. There is punitive 30% withholding tax on any financial institution that fails to report.<\/p>\n

India agreed to sign a Model 1\u00a0FATCA<\/a>\u00a0Model Intergovernmental Agreement (IGA)\u00a0with the U.S. \u00a0The IGA would likely require Indian financial institutions to report information on U.S. account holders to India\u2019s Central Board of Direct Taxes, which would then share the information with the U.S. Internal Revenue Service (IRS).\u00a0\u00a0The agreement would provide the Internal Revenue Service (IRS), access to details of all\u00a0offshore<\/a>\u00a0accounts and assets beyond a threshold limit held by Americans here, while a reciprocal arrangement would be offered for Indian authorities as well.<\/p>\n

Many Indian financial institutions have already registered on the IRS\u2019s\u00a0FATCA<\/a> Registration Portal. The IRS has published a searchable list of financial institutions. The\u00a0FFI List Search and Download Tool<\/a>\u00a0is located on the IRS\u2019s\u00a0FATCA website<\/a>. The tool can be used to search for the name of a specific foreign financial institution and find out if it has registered under\u00a0FATCA<\/a>. As of today, 739 financial institutions in India have registered with the IRS.\u00a0 Users can also download an entire list of financial institutions with the tool. See the\u00a0FFI List Search and Download Tool<\/a>\u00a0and\u00a0User Guide<\/a>. Countries complying with FATCA can be found at\u00a0FATCA\u00a0\u2013 Archive<\/a>.<\/p>\n

Who is Reported?<\/p>\n

Financial institutions in India will carry out a detailed due diligence on all their clients and report details of their U.S. clients to the Internal Revenue Service.\u00a0 U.S. persons for tax purposes are generally considered as:<\/p>\n