 "Get Fatca compliant at the earliest")
Many investors, in the recent months, have found that mutual fund houses have suddenly started seeking additional details of investments. The reason: The Central Board of Direct Taxes (CBDT) had given a deadline of August 31 for investors to follow the Foreign Account Tax Compliance Act or become Fatca compliant.
However, while the deadline has been deferred recently, investors should still go ahead and do it.
Fatca is a law that has been enacted in the United States targeting people who are 'US Persons' for tax purposes with wealth in other countries on which they wish to evade tax. The US government has entered into inter-governmental agreements (IGA) with many countries, including India. Indian financial institutions are now obliged to obtain self-certification from their customers about their tax residency status. If they come across persons who are US tax residents, they are required to report both their holdings and transactions to the Indian tax authorities, which in turn will share this information with the Internal Revenue Service (IRS, the US tax authority).
If you are tax resident of India, all you have to do is fill a 'No' in the form where you are asked: Is your country of tax residency other than India? Some other details like gross annual income, occupation, whether you are a politically exposed person and other details are also sought. You will have to fill the Fatca form separately for a variety of financial institutions: mutual funds, banks, insurance companies, brokers, depository participants, private equity funds and others. Visit their web sites or call their customer service numbers.
Registrar and transfer agents (RTAs) like CAMS are making efforts to get mutual fund customers to comply by providing online links and sending emails, letters and SMS messages. Search the net for the link or check your inbox for an email (with a link that allows you to fill the form).
If you don't comply, your account could be closed. The term "closed" is being interpreted in two ways: one, the account is closed to further investment but the amount already invested remains there. The second, more drastic, interpretation is that money is redeemed from the account. "Mutual funds have represented to Sebi, which in turn has requested the government, to interpret closing of account as non-acceptance of further investment. But we have not received communication from the government on this," says Rajiv Shashtri, managing director and chief executive officer, Peerless Mutual Fund. Before things come to such a pass, fill up the required form.
FACT FILE OF FATCA
However, while the deadline has been deferred recently, investors should still go ahead and do it.
Fatca is a law that has been enacted in the United States targeting people who are 'US Persons' for tax purposes with wealth in other countries on which they wish to evade tax. The US government has entered into inter-governmental agreements (IGA) with many countries, including India. Indian financial institutions are now obliged to obtain self-certification from their customers about their tax residency status. If they come across persons who are US tax residents, they are required to report both their holdings and transactions to the Indian tax authorities, which in turn will share this information with the Internal Revenue Service (IRS, the US tax authority).
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For the purpose of Fatca, an 'US Person', whose account needs to be reported, is all of the following: a US citizen; a green card holder; and a citizen of another country who has lived long enough in the US to qualify as a tax resident. Such persons get exempted from being reported under certain circumstances. "The US-based NRI will have to provide a self-certification saying that she/he is a US-based resident and provide additional details called for in the self-certification form, for example, US tax identification or social security number, US address and telephone number, etc," informs Pranay Bhatia, partner-direct tax, BDO India. According to Arnav Pandya, those who have large investments in India need to show both the investment and the income arising from it in their US tax returns. In case of large amounts, the IRS may also be interested in the source of their wealth.
If you are tax resident of India, all you have to do is fill a 'No' in the form where you are asked: Is your country of tax residency other than India? Some other details like gross annual income, occupation, whether you are a politically exposed person and other details are also sought. You will have to fill the Fatca form separately for a variety of financial institutions: mutual funds, banks, insurance companies, brokers, depository participants, private equity funds and others. Visit their web sites or call their customer service numbers.
Registrar and transfer agents (RTAs) like CAMS are making efforts to get mutual fund customers to comply by providing online links and sending emails, letters and SMS messages. Search the net for the link or check your inbox for an email (with a link that allows you to fill the form).
If you don't comply, your account could be closed. The term "closed" is being interpreted in two ways: one, the account is closed to further investment but the amount already invested remains there. The second, more drastic, interpretation is that money is redeemed from the account. "Mutual funds have represented to Sebi, which in turn has requested the government, to interpret closing of account as non-acceptance of further investment. But we have not received communication from the government on this," says Rajiv Shashtri, managing director and chief executive officer, Peerless Mutual Fund. Before things come to such a pass, fill up the required form.
FACT FILE OF FATCA
- The last date for filling the Fatca form has been extended by CBDT
- Information required: Gross annual income, occupation, whether you are politically exposed, and your country of tax residence
- Additional information for US-based NRIs such as, tax information number, US address and phone number
- Such NRIs also need to report their holdings and earnings in India when filing tax returns in the US
- If you don't fill the Fatca form, the account could be closed