Make Sure You have Filed FATCA Compliance Certifications
Parag Patel 25 January 2019
Many Indian banks and financial institutions have, in recent years, been requesting customers to complete a ‘FATCA compliance certificate’. The reason for the request is that India and the US signed an agreement to implement the Foreign Account Tax Compliance Act (FATCA) which allows automatic exchange of tax information between the two countries. 
Under the FATCA pact, financial institutions in India would be required to report information about US account-holders/taxpayers directly to the Indian government, which would be then passed on to the US Internal Revenue Service (IRS). FATCA is an important part of the US government’s effort to address tax evasion. 
Last year, market regulator Securities and Exchange Board of India (SEBI) required that Indian financial institutions have to file certification of their FATCA compliance with SEBI on an annual basis as well as put in place a system to validate the information collected. Account-holders must provide a self-certification of compliance under FATCA. Failure to provide self-certification of compliance could result in the non-compliant accounts being blocked and made inaccessible for any transactions.
FATCA is part of the US’s answer to tracking money hidden in offshore accounts so it can be brought into the US tax net. Over 100 countries have signed FATCA and automatically report foreign accounts and income data to the US IRS. As a result, foreign banking secrecy no longer exists: virtually all foreign banks report their data to the IRS. In 2015, India had signed the inter-governmental agreement (IGA) with the US for implementing FATCA.  
Indian investors (including non-resident Indians—NRIs), who hold accounts in any Indian financial institution such as mutual funds or have bank fixed deposits, must file a FATCA self-certification form. All joint investment account-holders, including any power of attorney holders and guardians of minors, also need to attach their FATCA/CRS (Common Reporting Standard) certifications.
The account-holders need to provide details such as tax residency status in India, passport status, immigration status and documents supporting it, such as documents stating place of birth, occupation, income details, and tax identification number.
Account-holders should be certain that they are in full compliance with all US tax and reporting requirements, to avoid future tax and legal problems. For example, US tax law requires annual information reporting on all Indian accounts over US$10,000 in the aggregate. 
IRS has established several amnesty programmes, under which a non-compliant individual can become compliant and avoid potentially high penalties or criminal prosecution. However, these amnesty programmes, generally, require the taxpayer to come forth before being contacted by IRS.
Account-holders should seek competent US tax legal advice before completing any self-certification or know your customer (KYC) documents for non-compliant accounts.
(Parag Patel is a US-based tax attorney with Patel Law Offices in New Jersey, USA.)
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