India, US sign FATCA; pact to help detect and discourage offshore tax evasion

New Delhi: To check offshore tax evasion, India and the US signed an agreement to implement FATCA that will facilitate exchange of information between the two countries from October 1. The Foreign Account Tax Compliance Act (FATCA) was signed by Revenue Secretary Shaktikanta Das and US Ambassador  Richard Verma. "FATCA is a mutual effort to combat tax evasion and it   would be mutually beneficial for both the countries. FATCA would detect, discourage offshore tax evasion.

This kind of exchange of information is top priority for governments", Verma said. Talking to reporters after singing the agreement, Das said: "We reassured the US government of the binding commitment to fight the menace of evasion and bring   transparency in the matters of payment of taxes which are   legitimately due to the government."  

US law FATCA seeks to facilitate flow of financial   information between countries. Under the inter-governmental   agreement, Indian financial institutions would have to reveal   information about US tax payers to the revenue department   which would be passed on to the US tax authorities. Under the pact, US will also share with India financial   information. The current reporting period beginning October 1 would be for July-December 2014.  

If a financial institution does not comply to FATCA, it   will have to pay 30 per cent penalty tax on all its US revenues, including dividend, interest, fees and sales. FATCA will help India deal with the black money menace.   The country has stepped up efforts to tackle it. Under the multilateral agreement India will start receiving information from other countries under automatic exchange of information   (AEOI) route from 2017 onwards.