Bank account holders, National Pension Scheme subscribers, and mutual fund and insurance scheme investors, who invested between 1st July 2014 and 31st August 2015 must be FATCA compliant by 30th April 2017, failing which their accounts may be blocked or suspended. Read on to know more about what it means to be compliant with FATCA.
What is FATCA and why is it necessary?
FATCA is the acronym for Foreign Account Tax Compliance Act of the United States government, and it requires all financial institutions to report financial transactions of US nationals or entities in order to provide the US Tax authorities (IRS) with: (i) information about those nationals' investments outside of the US, and (ii) information about any US owners of non-US entities.
Through FATCA, the US government primarily aims at better tax compliance from US taxpayers that have accounts in financial institutions outside their home country. This Inter-Government Agreement (IGA), which India along with over 100 countries have signed, is also a mutual sharing of financial information by the US with India's Ministry of Finance about non-resident Indians with investments in the US.
How does one become Foreign Account Tax Compliance Act (FATCA) compliant?
FATCA declaration is mandatory for both individual and non-individual investors. Taxpayers paying taxes outside India must also provide the Tax Identification Number.
You need to declare the following to your bank and mutual fund:
FATCA compliance can be done online or offline for your savings account, National Pension Scheme accounts, and mutual fund accounts.
If you are still not FATCA compliant, the prudent thing is to act now. This way, you can avoid the pain of getting your bank accounts unfrozen, your NPS account unblocked, and your mutual funds transaction suspension revoked.
Disclaimer: Copyright Kotak Mahindra Bank Ltd.
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