US tax authorities may soon get access to all significant assets and accounts held by American citizens and companies with banks and other financial sector entities in India, and a draft inter-government agreement in this regard is currently being vetted by the Sebi.
The proposed agreement is part of the US administration's efforts to combat any possible tax evasion by its residents through foreign accounts in India and other countries.
The US is signing these agreements with different countries under a three-year-old law, known as the Foreign Account Tax Compliance Act (FATCA), which is aimed at combating tax evasion by US persons and companies holding accounts and other financial assets abroad.
According to a senior official, a draft Inter-Government Agreement (IGA) is currently under consideration of India's capital markets regulator Sebi, which oversees a major part of the financial services sector.
The Finance Ministry has already asked banking regulator RBI for its views and suggestions on the proposed IGA.
A final IGA would be prepared by the Finance Ministry after taking into account the views and suggestions of Sebi, RBI and other stakeholders and the FATCA agreement should be implemented by the deadline of January 1, 2014, he said.
Once implemented, the agreement would provide the US tax department, the Internal Revenue Service (IRS), an access to details of all offshore accounts and assets beyond a threshold limit held by Americans here, while a reciprocal arrangement could be offered for the Indian authorities as well.
Starting from USD 50,000, the threshold limits would vary for different classes of entities.
The US has already signed similar bilateral agreements with the UK, Switzerland and a few more countries, while talks are on with over 50 jurisdictions, including India.
