India gets information from US, Sinha warns tax evaders

Finance Ministry: Holding foreign assets risky as FATCA is in place

The finance ministry on Thursday said it has received information from the US under the financial information exchange pact FATCA in the last two months and it is being analysed.

The Foreign Account Tax Compliance Act (FATCA) that came into effect from September 30 has enabled automatic exchange of financial information between India and the US. “We have received information that’s now being processed. The information exchange started on September 30. We have send some information and we have received some and that is being analysed,” department of revenue joint secretary Akhilesh Ranjan said.

The Inter-Governmental Agreement (IGA) between India and the US, signed in July as part of FATCA implementation, requires the Indian Financial Institutions to provide necessary information to Indian tax authorities, which will then be transmitted to the US automatically. The rules prescribe reporting requirements on a staggered basis starting from 2014, and reporting of all details prescribed from 2017 onwards. They also specify due diligence procedure for identifying reportable account and various forms. Indian entities will do a reciprocal information sharing about Americans.

The FATCA agreement enhances tax transparency and accountability in matters of financial reporting and payment of taxes which are legitimately due to various governments.

With the FATCA pact coming into place and India set to get information from foreign countries, the minister of state for finance Jayant Sinha cautioned those holding overseas assets and said that the non-disclosure of overseas assets will become a “very risky affair” from 2017.

Addressing the sixth meeting of the Group on Automatic Exchange of Information (AEOI), he said the CBDT has constituted a ‘Information Security Committee’ to ensure confidentiality of data received from foreign countries.

“Non-disclosure of foreign assets will increasingly become a very risky affair for tax payers... Strict bank secrecy has ended, and a new environment of transparency is now operational,” Mr Sinha said.

He said steps are being taken to put in place a robust information security mechanism in the Income Tax department by constituting the committee at the level of CBDT and local information security commission at cadre control and through issuance of guidelines.

The tax department will come up with a revised guidance note of AEOI before December 31, 2015. It will provide guidance to financial institutions, regulators and tax department officers for ensuring compliance as per AEOI norms.