The Reserve Bank of India (RBI) has asked all banks and financial institutions to be prepared to implement the Foreign Account Tax Compliance Act (FATCA).
In a notification issued on Friday, the RBI said that India has signed an agreement with United States for improving international tax compliance apart from being a party to a multi-lateral agreement to automatically exchange information based on Convention on Mutual Administrative Assistance in Tax Matters.
The RBI has asked all regulated entities to take appropriate action for implementation of due diligence and reporting requirements as laid down in the rules and ensure compliance.
It said all the concerned financial institutions should register on the related e-filing portal of Income Tax Department as Reporting Financial Institution by submitting the requisite details.
It said reporting should be in a manner that lends itself to credible auditability, including audit of the IT system which should be suitably upgraded to not only maintain the information required under the rules but also to record and store the due diligence procedures.
The RBI warned that non-compliance of the rules can lead to huge penalties in addition to loss of reputation.