The US government has signed a tax evasion pact with India, in accordance with its Foreign Account Tax Compliance Act (FATCA) provisions, in a move to thwart possible tax evasion by its citizens.
The FATCA regulations ensure that the US citizens and residents don’t evade the US taxes by holding offshore accounts.
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After signing the agreement with the US, the Securities and Exchange Board of India (SEBI), RBI, and others will issue guidelines to Indian financial firms about reporting norms for accounts held by US citizens and residents in the country.
The US government also has a Model 2, whereby the financial organizations will have to report the account details directly to the IRS.
India has opted for Model 1 under the US pact, which require financial entities to report information on US account holders to the US IRS (internal revenue service) through CBDT.
It is believed that signing of IGA, together with regulatory measures from SEBI, would be helpful for Indian financial institutions and corporates to better comply with this significant legislation.
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By GlobalData
