Indo-Americans’ Assets Come Under The Glare Of The U.S. Tax System
NEW YORK – There was a time when Indians would relocate to America for the so-called American Dream. Well all that is about to stop now, since, NRI’s are being cautioned to be aware of their decisions as the nightmare of tax is about to plague their lives. We all pay tax. It is a mandatory payment in all countries that we live and work in but the game is about to change.
Unlike before when Indians in America did not really disclose all their income or assets from India, the American government is swiftly making changes to the tax systems to get information on all assets of NRI’s in their country. This means that Indian-Americans will have to pay taxes for their assets that are stored in India as well as in America. The burden is about to get a lot heavier.
Indians for a long time have been saving assets in India due to the low interest rates in America. This is done because in India they get a huge savings interests unlike the U.S. However, he U.S. government is about to take a sweep of their money. Account Firms in India are advising their NRI clients to come clean, expose their assets to the American government before it’s too late. These accountant firms are advising their clients that self exposure of assets will let the American government be fair to them.
America’s new double tax agreement with India would mean that under FATCA, America can track data of asset of their citizens. These assets will not be only those that are in America but their original motherland. Also Indian financial institutions will be compelled to sign this agreement, if not, face high tax with their business on American soil.
“With FATCA, the flow of information will be far more as Indian financial institutions will have to compulsorily share data on U.S. residents’ financial assets in India. I believe India will have to sign the intergovernmental agreement for FATCA, failing which Indian institutions could be subjected to a higher tax in the U.S.,” said Daksha Baxi, executive director at the law firm Khaitan & Co said to Economic Times.
Financial firms are of the view that, should the global tax scrutiny by America intensify then the amount of investment made by Diasporas will dip in the country. Here is a little insight on the tax structure for NRI assets in America. Dividends from a foreign company vary between 20 and 39.6 percent. Long-term Capital gains tax is at 20 percent with no difference in list and unlisted stock. Estate duty is at 40 percent. Gifts beyond $14,000 are viable for tax at 40 percent.
There are ways to carefully plan tax evasion by following the law but it will require smart planning. No matter what the situation be accountant firms have said that this is not illegal. FATCA gives India every right to look into the assets of its citizens in America and vice versa.
