The revenue department has extended the date for reporting details of accounts under Foreign Account Tax Compliance Act (FATCA) by six months to December 31, 2016, and excluded two types of entities from the purview of the Act.
Under the amended rules, the reporting of the high value account as on December 31, 2015, by foreign financial institutions based in India under FATCA should be completed by December 31, 2016, instead of June 30, 2016.
In order to remove anomaly in the definition of "passive non-financial entity", the Central Board of Direct Taxes (CBDT) has excluded 'withholding foreign partnership (WP) and withholding foreign trusts (WT)' from the purview of FATCA reporting norms.
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India and US in July 2015 signed an Inter-Governmental Agreement to implement the FATCA in India. According to the agreement, foreign financial institutions in India are required to report tax information about US account holders to the Indian Government which will, in turn, relay that information to the US Internal Revenue Service.
The rationale behind the decision of extending the reporting deadline was to provide more time to Reporting Financial Institutions (RFIs) to obtain and submit information which is a time consuming process, said Rakesh Nangia, Managing Partner, Nangia & Co.
"In order to remove the undue hardship, CBDT has given them a specific exclusion and hence a WP/WT shall not be required to conduct a due diligence procedure under Rule 114H," Nangia said.
