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September 30 Deadline for India-US Tax Evasion Deal
Mar 10, 2015

The US has given India time till September 30 to put in place a framework to track down the assets that nationals of each country hold in the other nation without reporting to domestic tax authorities.

  • The new information-sharing agreement between the Income-Tax Department and the IRS under the US Foreign Account Tax Compliance Act (FATCA) would be signed in New Delhi and come into force from October 1.

  • The deadline has so far been extended twice, considering the lengthy consultation India has to do with various financial sector regulators.

  • Under the agreement, insurance, banking, pension and stock-broking firms have to report their US client details to the Income-Tax Department for eventual sharing with its treaty partner.

  • The idea is to capture details of US taxpayers’ unreported foreign financial accounts, stock, securities, mutual funds and insurance or annuity schemes with a cash value above $50,000.

  • FATCA mandates all US citizens, residents and non-resident citizens to report their foreign accounts at the end of the tax year as US follows a system of taxing the world-wide income of its people. 

  • India, on the other hand, taxes the worldwide income of only its residents, while non-residents are taxed only on the income sourced from India.

  • The extension of the deadline removes fears of American financial institutions imposing a FATCA-mandated 30 percent penal withholding tax on payments made to Indian clients in the absence of the inter-governmental agreement.

  • Indian Finance Minister announced a new Bill proposing jail term for Indian nationals failing to report foreign assets.

  • India is preparing a major integration of database available with direct and indirect tax authorities to zero in on instances of evasion.

  • Central Board of Direct Taxes said adoption of GST will provide a nationwide data base of a large number of transactions, which, along with customs and income-tax database, will be made accessible to all departments in a much more intensive manner.


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