Regulator Sebi today asked market entities to ensure compliance with changed income tax regulations, with India becoming a signatory to FATCA as well as a global pact to check tax evasion.
The latest directive comes close on the heels of the government signing FATCA with the United States and the Multilateral Competent Authority Agreement (MCAA) as part of larger efforts to tackle the menace of tax evasion.
Last month, India and the US inked a tax information sharing agreement under FATCA which will enable automatic exchange of financial information between the two countries on tax evaders from September 30.
The US enacted the Foreign Account Tax Compliance Act (FATCA) in 2010. Under the pact, foreign 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.
In case of non-compliance, the entities will face penalty.
Towards implementation of FATCA and MCAA, the government has effected necessary legislative changes to the Income Tax Act. Certain rules have also been notified in this regard.
"All registered intermediaries are advised to take necessary steps to ensure compliance with the requirements specified in the aforesaid rules after carrying out necessary due diligence," Sebi said.
Under MCAA, all countries that are signatories are obliged to exchange a wide range of financial information after collecting them from financial institutions in their respective jurisdictions.
FATCA will cover automatic sharing of information on bank accounts as well as financial products like equities, mutual funds and insurance and is aimed at fighting the menace of black money stashed abroad.
The agreement "underscores growing international co-operation to end tax evasion everywhere... The signing of Inter Governmental Agreement (IGA) is a re-affirmation of the shared commitment of India and US towards tax transparency and the fight against offshore tax evasion and avoidance," the Finance Ministry said last month.
