AMFI has issued a press release in which it has clarified that ‘freezing of account’ doesn’t mean ‘impounding of accounts’.
This has come in the wake of some recent media reports saying that 5 million mutual fund folios are facing risk of closure due to non-compliance FATCA norms.
In the press release, AMFI said that some people seem to have misunderstood the term “freezing of accounts” to mean “impounding of accounts”.
AMFI further clarified that when a folio is ‘freezed’, the investors account would continue earn the returns/benefits accruing in the normal course. “The term “freezing of accounts” in mutual fund parlance merely means permitting further transaction in the account only after the requirement is fulfilled, which in the context of FATCA compliance, is to provide a self-certification about one’s tax residency,” clarified AMFI.
Earlier this week, C.V.R. Rajendran has said that AMFI had requested the Ministry of Finance to freeze accounts which are non-FATCA compliant instead of closing them. “I think the Ministry will respond positively to our request,” C.V.R. Rajendran, CEO, AMFI told Cafemutual.
He said that around Rs. 1.08 lakh crore industry AUM could be at stake if the industry fails to meet the August 31, 2016 deadline.
Simply put, if proposal of AMFI goes through, non-FATCA complaint accounts will continue to be treated as a regular folios. However, such accounts cannot accept fresh investments till the time of FATCA compliance.
Earlier, CBDT had issued a circular in which it had asked fund houses to submit self-declaration of all 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 required 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.
AMCs and their registrars have been making persistent efforts to obtain FATCA self-certification from investors since the FATCA compliance became a law. In fact, all registrar and transfer agents have introduced online facility for distributors and investors to update their FATCA information.
