If norms under the Foreign Account Tax Compliance Act (FATCA) are violated, these accounts will be blocked till the self-certification is received.
“The account holders may be informed that, in case self-certifications are not provided till April 30, 2017, the accounts will be blocked, which will mean that the financial institution will prohibit the account holder from effecting any transaction with respect to such accounts,” the Central Board of Direct Taxes (CBDT) said in a statement.
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India had entered into an agreement with the US for implementation of the FATCA with effect from August 31, 2015. FIs had to obtain self-certification from account holders by August 31, 2016, for all individual and entity accounts opened from July 1, 2014, till August 31, 2015.
“Newer accounts already have know-your-customer norms,” said Rakesh Nangia, managing partner Nangia & Co.
The tax department had on August 31, 2016, indefinitely extended the deadline for complying with the self-certification norm.
The FATCA requires FIs outside the US to report on the foreign assets held by their non-resident US account holders or be subject to withholding tax. FIs in India are required to provide this information to the CBDT which, in turn, renders it to the US authorities.
What is Fatca
The Foreign Account Tax Compliance Act (FATCA) of the US makes it mandatory for overseas financial institutions to give information about non-resident US account holders or face withholding tax. India had entered into an agreement with the US for implementation of FATCA with effect from August 31, 2015.Financial institutions in India are required to give this information to CBDT, which in turn gives it to US authorities