The new 2023 Tax Budget in India has many new proposals. However, the most important proposal for investors, especially non-resident Indians, is a new penalty for providing inaccurate information for KYC (Know Your Customer) including information provided in FATCA and CRS questionnaire. <\/p>\n\n\n\n
The new budget proposes a penalty of Rs.5,000 if there is\nany inaccuracy in the statement of financial transactions submitted by a\nprescribed reporting financial institution and such inaccuracy is due to false\nor inaccurate information submitted by the customer. The financial institution\nshall be entitled to recover the penalty from the customer.<\/p>\n\n\n\n
Background:<\/p>\n\n\n\n
Since 2014, the Indian Income Tax Act has\nmade it mandatory for any financial institution to submit a statement for any\nspecified financial transaction or a reportable account and introduced penalty\nof Rs. 50,000 for inaccurate submissions. \n<\/p>\n\n\n\n
As a result, a long FATCA\/CRS declaration\nwas made part of the updated KYC (Know Your Customer) procedures for collecting\nrequired information for almost all institutions. The information was collected\non self-certification basis but no penalty was specified for submitting a false\nself-certification by account holders which led to furnishing of an incorrect\nstatement by financial institutions.<\/p>\n\n\n\n
Since then many customers have provided\nfalse information on the FATCA\/CRS declaration and KYC forms. Most notably,\nmany non-resident customers falsely claimed to be resident Indians and provided\nlocal Indian information in order to a local account (otherwise NRIs must open\na NR account). <\/p>\n\n\n\n
Impact:<\/p>\n\n\n\n
To make the account holder\nresponsible for his self certification, this budget introduced additional\npenalty of Rs. 5,000 for any inaccuracy due to false or inaccurate information\nsubmitted by the account holder. While the penalty is on the financial\ninstitutions, they are also allowed to recover the amount from the account\nholder.<\/p>\n\n\n\n
If a customer fails to provide or\nprovides inaccurate (or outdated) information regarding their citizenship,\nresidential status, country of tax residency on KYC, FATCA\/CRS form, they will\nget penalized. The penalty also applies\nto every joint holder. Also, as the reporting by financial institutions is made\nannually, the penalty of Rs. 5000 will also be levied every year. <\/p>\n\n\n\n
The penalty can be very large for someone who has 5 bank accounts, 10 mutual funds, 3 brokerages, and 2 insurance policies. The penalty would be Rs. 100,000 (20 x 5000) annually; and if the account is joint, the same penalty would also apply to all joint account holders.<\/p>\n\n\n\n
Indian account holders beware: We expect new aggressive\nenforcement from all Indian financial institutions in terms of verification of KYC\/FATCA\ninformation. The penalty could be very high for someone having multiple joint\nholders, multiple accounts, multiple investments.<\/p>\n","protected":false},"excerpt":{"rendered":"
The new 2023 Tax Budget in India has many new proposals. However, the most important proposal for investors, especially non-resident Indians, is a new penalty for providing inaccurate information for KYC (Know Your Customer) including information provided in FATCA and CRS questionnaire. The new budget proposes a penalty of Rs.5,000 if there is any inaccuracy […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_daextam_enable_autolinks":"1","_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-4453","post","type-post","status-publish","format-standard","hentry","category-planning-for-tax-minimization"],"_links":{"self":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/4453","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/comments?post=4453"}],"version-history":[{"count":2,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/4453\/revisions"}],"predecessor-version":[{"id":4458,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/posts\/4453\/revisions\/4458"}],"wp:attachment":[{"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/media?parent=4453"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/categories?post=4453"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/patellawoffices.com\/blog\/wp-json\/wp\/v2\/tags?post=4453"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}