India has signed the Foreign Account Tax Compliance Act (FATCA) agreement with the US to fight offshore tax evasion.
The deal was signed by India’s revenue secretary Shaktikanta Das and US Ambassador Richard Verma in New Delhi.
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The pact will include automatic sharing of information on bank accounts as well as financial products like equities, mutual funds and insurance and is aimed at combating the menace of black money stashed abroad.
The agreement will allow automatic exchange of financial information between the two nations about tax evaders from 30 September.
Under the accord, Indian financial institutions will have to provide their central authority with details of US account-holders, which will be passed on to the US Internal Revenue Service (IRS).
US will also provide similar information about Indian account holders in the US as part of the deal.
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By GlobalDataAs per the FATCA law, failure by an FFI to disclose information on their US clients will result in a 30% penalty tax on all its US revenues including dividend, interest, fees and sales. FATCA requires financial institutions to share information about US accounts worth over $50,000.
"It is hoped that the exchange of information on an automatic basis, regarding offshore accounts under Fatca, will deter tax offenders, enhance tax transparency and eventually bring in higher equity into the direct tax regime, which is necessary for a healthy economy," Das said.
"We reassured the US government of the binding commitment to fight the menace of evasion and bring transparency in the matters of payment of taxes which are legitimately due to the government," Das added.
"FATCA is a mutual effort to combat tax evasion and it would be mutually beneficial for both the countries. FATCA would detect, discourage offshore tax evasion. This kind of exchange of information is top priority for governments," Verma said.
Also, India has already signed a multilateral agreement on automatic information exchange under which it will start receiving information from other countries from 2017 onwards.
