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FATCA may starts functioning from 2nd May

Foreign Account Tax Compliance Act

Chennai, May 2 (UITV/IANS)- The full impact of bank accounts getting blocked due to non-compliance with the Foreign Account Tax Compliance Act (FATCA) will be known on Tuesday or Wednesday as per the source. It would be functioning from 2nd of May. "Today (Monday) is a holiday in some states due to May Day and the headquarters of most of the banks are located in those states," a banker told to IANS on Monday.

It has been reported that, the bank software would automatically block a FATCA non-compliant account and this matter would be finial known on Tuesday.

On the other hand , one government bank staff told that that bank’s software does not automatically block a non – compliant account or it has to be done manually would be known on Tuesday.

FATCA is a unique piece of legislation enacted in the US which requires financial institutions (FIs) to provide information about account holders who are US persons to the Internal Revenue Service (IRS).

"Non-compliant FIs are liable to a punitive withholding tax of 30 per cent of their US sourced income," Rahul Jain, Partner, Nangia and Co, an international tax advisory and accounting firm, told IANS.

Rahul Jain, Partner, Nangia and Co, an international tax advisory and accounting firm

"The agreement is reciprocal in nature and allows for India to receive tax information in respect of its own residents," he said.

"The FATCA agreement will, therefore, allow for exchange of information between the two countries and will help considerably in detection of unaccounted money held by US persons in India and vice versa," he added.

Under Indian Income Tax rules, financial institutions have to obtain self-certification and carry out due diligence in respect of all individual and entity accounts opened between July 1, 2014, and August 31, 2015.

The last date for submission of self-certification ended on April 30, 2017.

Jain said the FATCA agreement can have serious implications for Non-Resident Indians (NRIs) who qualify to be US persons.

Non Resident Indians in USA

Indian resident taxpayers holding assets in the US will also be impacted.

Together with the Black Money Law 2015, this could have serious ramifications for Indian residents who may not have reported such assets to the Indian tax authorities, Jain said.

According to Jain, any organization or individual who has not been able to submit its or his FATCA self-declaration by the deadline of April 30 could make such declaration now and ask for his account with the Indian FI to be unblocked or de-frozen.

Edited by Ujjainee Chakraborty