Many fund houses are rushing to comply with the stringent Foreign Account Tax Compliance Act (FATCA) norms to meet the August 31 deadline. Fund houses are reportedly finding the deadline a bit challenging to meet and they may request CBDT through AMFI to extend this deadline.
Earlier, CBDT had issued a circular in which it had asked fund houses to submit 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.
Two senior fund officials told Cafemutual that they have been reaching out to investors through emails, letters and phone calls who had invested between the mentioned dates. “We are reaching out to investors who have invested between July 2014 and August 2015. However, it is difficult to get self-certification from all these investors as many of them have either moved to other addresses or changed their phone numbers. Also, investors may not like to share such documentations repeatedly,” said one of the officials quoted above.
“It is practically impossible to reach out to lakhs of investors and get their self-declaration certificates. Many investors are ignoring our communication and we cannot meet them personally and ask them to submit self-declaration forms. It is time consuming for all of us. We all have to come out with a strategy to deal with this,” said an operation heads of a large fund house.
The CEO of a bank sponsored fund house said that the industry is having healthy AUM at stake under the FATCA norms. “A sizeable chunk of AUM from a few lakhs of investors comes under these norms. If the industry fails to comply with the norms before the deadline, it could affect the growth of the industry in a big way,” he added.
Investors who have invested in mutual funds after August 31, 2015 are FATCA complaint since fund houses insist investors to submit a self-declaration form before initiating any transaction. In fact, all registrar and transfer agents have introduced online facility for distributors and investors to update their FATCA information.
