In a relief to fund houses, the Central Board of Direct Taxes (CBDT) has clarified that financial institutions can accept self-declaration forms online to comply with the Foreign Account Tax Compliance Act (FATCA) norms.
In a circular, CBDT has said, “It has been decided that self-certification can also be obtained through internet banking platform from the user account where the customer has transaction rights.”
An operational head of a large fund house said that AMCs can accept self-declaration from investors either through R&T websites or through their websites. This will help meet the deadline to comply with FATCA norms, he added.
Further, CBDT said, “Financial institutions are in the process of carrying out the due diligence of financial accounts and obtaining self-certification from the account holders. Representatives of FIs have informed that there are large number of financial accounts and it is practically very difficult to physically obtain the self-certification from the account holders. It has been requested to provide alternative channels to obtain self-certification.”
Earlier, CBDT had issued a circular in which it had asked fund houses to submit a self-declaration of all the investors who had invested in mutual fund schemes between July 1, 2014 and August 31, 2015 to comply with FATCA regulations. The circular stated that failing to comply with the norms may attract closure of unreported accounts. Fund houses are expected to submit the self-declaration forms by August 31, 2016.
FATCA is an anti-tax evasion law under which fund houses are required to report information on US investors to US IRS (Internal Revenue Service) through CBDT. India has agreed ‘in substance’ to FATCA by signing an Intergovernmental Agreement Model 1 (IGA-1) with US. Simply put, the legislation is meant to prevent wealthy US individuals from parking money overseas to avoid paying taxes.
