Should you invest overseas or have a foreign bank account, you have probably heard of the FATCA Act. Many Indian taxpayers are not clear about how this law will impact them or what it implies. We shall easily explain the FATCA Act in this blog.
What is the FATCA Act?
Foreign Account Tax Compliance Act stands as FATCA Act. Passed by the United States, this law seeks to ascertain whether its people are stashing money abroad. India agreed to follow FATCA guidelines in tandem with the US. If you fall under this act, then Indian banks, mutual funds, and financial institutions now have to gather and document information.
Who Does FATCA in India Affect?
The rules of the FATCA Act could impact you should you be a US citizen or green card holder living in India.
- You live in India and have US-based investments.
- You are an NRI getting US-based income.
- You share accounts with someone living in the US.
Why is FATCA Crucial?
- It enables both the USA and India to stop tax avoidance.
- It guarantees openness for overseas accounts.
- It keeps people from concealing income from outside their native country.
What Financial Institutions Have to Do
Indian banks, mutual funds, insurance brokers, and other establishments have to:
- Demand self-declarations from clients.
- Get FATCA data, including country of birth, citizenship, tax identification number (TIN).
- Report US-linked individuals’ account information to Indian tax authorities.
What You Must Do
Should FATCA Act criteria flag your account:
- You have to turn in a FATCA self-declarations form.
- Send your foreign country’s TIN, or Tax Identification Number.
- Exclude all foreign income from your Indian Income Tax Return.
What Should You Know Should You Not Comply?
- Your bank or mutual fund account could be blocked.
- The Income Tax Department might send you notes.
- You might be penalized for underreporting foreign income.
Important Documents Needed for a PAN Card
- Passport (if relevant)
- International TIN
- FATCA self-certification form
Strategies for Compliance
- Open new accounts always with proper tax residency status.
- When asked by your bank or AMC, turn in FATCA declarations.
- Enter foreign income and assets into your ITR (Schedule FA).
