The finance ministry on Friday made it easier for Indian financial institutions to comply with the reporting requirements under the financial information exchange pact (Fatca) with the US.
The Central Board of Direct Taxes (CBDT) said valuation of securities could be done at the values regularly communicated by depository to the depository participants and brokers.
In addition, it said that TIN (Tax Identification Number) is not required to be collected by the financial institutions from a person if the identification number is not issued by the country where the person is resident for tax purposes. However, the financial institutions should make a note of it and also seek the TIN from the person after he obtains it.
Besides, the CBDT has agreed to allow “self-certification” for the financial institutions to obtain information via internet banking from the user account, where the customer has ‘transaction rights’.
“The CBDT clarification on account balance/value to be considered as per values regularly communicated by NSDL/CDSL will help the FIs to determine the reportable amount, especially in case of custodial accounts.
Hopefully, this should help reporting of unlisted securities. Further, the reporting utility has been updated to report zero balance in accounts,” said Bahroze Kamdin, partner, Deloitte Haskins & Sells LLP.
“The clarifications are a result of the continued consultation process followed by the CBDT along with financial services industry for reporting under Fatca, especially considering the tight timelines of reporting. One hopes that this only paves the way for further relaxations in the near future, given that many other challenges are being faced by Indian financial institutions,” Naresh Makhijani, partner and head, financial services, KPMG in India.
The Fatca, which came into effect on September 30, 2015, enables automatic exchange of financial information between India and the US.
As per an inter-governmental agreement (IGA) between India and the US signed in July as part of Fatca implementation, Indian financial institutions are required to provide necessary information to Indian tax authorities which will then be transmitted to the US automatically.
The rules prescribe reporting requirements on a staggered basis starting from 2014, and reporting of all details prescribed from 2017 onwards. They also specify due diligence procedure for identifying reportable account and various forms. Indian entities will do a reciprocal information sharing about Americans.
The Fatca agreement enhances tax transparency and accountability in matters of financial reporting and payment
of taxes which are legitimately due to various governments.
