FATCA: Rules
Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 by the Government of the United States of America (USA) (Govt. of US) with a view to combat tax evasion by U.S. citizens and residents through the use of offshore accounts.
FATCA requires financial institutions globally to share information about the financial accounts held by U.S. citizens/ residents for tax purposes to the Internal Revenue Services (IRS) of the Govt. of US.
On similar lines as FATCA, Organization for Economic Co-operation and Development (OECD) issued a standard for Automatic Exchange of Information (AEOI) in tax matters called as ‘Common Reporting Standard’ (CRS). CRS requires financial institutions globally to share information about the financial accounts held by the non-residents (other than U.S. citizens and residents for tax purpose).
To enable financial institutions in India to comply with FATCA and CRS, the Government of India (GOI) signed the Inter Governmental Agreement (India IGA) with the Govt. of US on 9 July 2015 and joined the Multilateral Competent Authority Agreement (MCAA) on 3 June 2015.
For implementing India IGA and MCAA, necessary amendments were made to section 285BA of the Income-tax Act, 1961 (Act). In exercise of the power conferred by section 285BA of the Act, Central Government notified the Income tax (11th Amendment) Rules, 2015 (Rules) to provide for registration of persons, due diligence procedures and maintenance and reporting of information by the financial institutions in India.
