Guidance Note on FATCA and CRS updated 30-11-2016

GUIDANCE NOTE ON FATCA and CRS updated 30-11-2016

Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
Foreign Tax & Tax Research Division

Guidance Note on Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS) updated as on 30th November 2016

Purpose of the Guidance Note
This Guidance Note is for providing guidance to the Financial Institutions, Regulators and officers of the Income Tax Department for ensuring compliance with the reporting requirements provided in Rules 114F to 114H and Form 61B of the Income-tax Rules, 1962. The Guidance Note is intended to explain the reporting requirements of FATCA and CRS in a simple manner. Since a large part of the Rules is based on IGA between India-USA and the CRS on AEOI, the Financial Institutions may refer to the IGA and CRS along with its Commentary to get further understanding of the terms used.

In this Guidance Note, reference to the CRS and Commentary has been made at appropriate places. All the stakeholders are requested to provide feedback and suggestions so that Guidance Note can be further updated as per evolving issues in the implementation of FATCA and CRS. An attempt has been made to discuss and describe the various provisions contained in the relevant Rules notified by the Government of India. In case of unlikely event of any inconsistency between the Rules and Guidance Note, the statutory position contained in the Rules shall prevail.

Document Revision List

In 2010, USA enacted a law known as “Foreign Account Tax Compliance Act” (FATCA) with the objective of tackling tax evasion through obtaining information in respect of offshore financial accounts maintained by USA residents and citizens. USA has entered into InterGovernmental Agreement (IGA) with various countries. The IGA between India and USA was signed on 9th July, 2015. It provides that the Indian FIs will provide necessary information to the Indian tax authorities, which will then be transmitted to USA periodically.

To combat the problem of offshore tax evasion and avoidance and stashing of unaccounted money abroad requiring cooperation amongst tax authorities, the G20 and OECD countries working together developed a Common Reporting Standard (CRS) on Automatic Exchange of Information (AEOI). 

The CRS on AEOI requires the financial institutions of the “source” jurisdiction to collect and report information to their tax authorities about account holders “resident” in other countries, such information having to be transmitted “automatically’ on yearly basis. The information to be exchanged relates not only to individuals but also to shell companies and trusts having beneficial ownership or interest in the “resident” countries. Further, the reporting needs to be done for a wide range of financial products, by a wide variety of financial institutions including banks, depository institutions, collective investment vehicles and insurance companies

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• Prima facie satisfaction u/s 148 can not be a non-existing or incorrect information
• Mutual Funds to value physical Gold and Silver by using the polled spot prices
• SC allows simultaneous CIRP proceedings against principal debtor & corporate guarantor
• Merely because sales were declared for only one month, same cannot be treated as bogus
• ITAT deleted addition as method of accounting had been accepted in earlier years