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Union Ministry clarifies on implementation of FATCA and CRS

Union Ministry clarifies on implementation of FATCA and CRS

  • The Finance Ministry has clarified on the implementation of Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standards.
  • All fixed deposits and auto sweep facilities in pre-existing savings bank accounts will not have to be reported.
  • Fixed deposits in savings accounts opened before June 30, 2014, and December 31, 2015, will not have to be reported to FATCA and CRS respectively.
  • Earlier, India had signed the FATCA with US which aims to counter tax evasion by the US taxpayers who use offshore accounts to park money otherwise taxable in the US.
  • Similarly, the CRS was released by OECD and G-20 countries as a standard basis for automatic tax information exchange between member countries through respective bilateral tax treaties.
  • As per the guidelines, the upcoming reporting in March 2015 and May 2016, all reporting has to be done in Indian currency. For the reporting in 2017, Form 61B and Schema will be suitably modified to include a field for capturing the type of currency.
  • Foreign Account Tax Compliance Act (FATCA):
    • The Foreign Account Tax Compliance Act (FATCA) is a the United States federal law whose intent is to enforce the requirement for United States persons to file yearly reports on their non-U.S. financial accounts to the Financial Crimes Enforcement Network (FINCEN).
    • The law requires all non-U.S. foreign financial institutions (FFI's) to search their records for indicating U.S. person status and to report the assets and identities of such persons to the U.S. Department of the Treasury.
    • The FATCA is the revenue-raising portion of the 2010 domestic jobs stimulus bill, the Hiring Incentives to Restore Employment (HIRE) Act and was enacted as Subtitle A (sections 501 through 541) of Title V of that law.
  • Common Reporting Standard (CRS:
    • The Common Reporting Standard (CRS) is referred to as the Standard for Automatic Exchange of Financial Account Information.
    • It is an information standard for the automatic exchange of information (AEoI), developed in the context of the Organisation for Economic Co-operation and Development (OECD).
    • The legal basis for the exchange of data is the Convention on Mutual Administrative Assistance in Tax Matters.
    • The idea of CRS is based on the USA Foreign Account Tax Compliance Act (FATCA) implementation agreements.
  • Central Board of Direct Taxes (CBDT):
    • CBDT is a part of Department of Revenue in the Ministry of Finance. It derives authority from Central Board of Revenue Act 1963.
    • CBDT deals with all matters relating to levy and collection of direct taxes and formulation of policy concerning administrative reforms of ITD.
    • The CBDT consists of following:
    • Chairman
    • Member (Income Tax)
    • Member (Investigation)
    • Member (Revenue)
    • Member (Audit & Judicial)
    • Member (Legislation and Computerization)
    • Member (Personnel and Vigilance)
    • The field offices of the Income Tax Departments are monitored by the Central Board of Direct Taxes (CBDT).
    • It provides essential inputs for policy and planning of direct taxes in India and is also responsible for the administration of direct tax laws through Income Tax Department.
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