Accounts of those individuals and entities who have not provided self-certification by April 30 will be blocked by the government from Monday, it has been announced. This would be done in order to comply with the provisions of the Foreign Account Tax Compliance Act (FATCA). “The account holders may be informed that, in case self-certifications are not provided till April 30, 2017, the accounts will be blocked, which will mean that the financial institution will prohibit the account holder from effecting any transaction with respect to such accounts,” the Central Board of Direct Taxes (CBDT) said in a statement earlier this month.
“This would mean that the financial institution would prohibit the account holder from effecting any transaction with respect to such accounts,” the Finance Ministry said. “The transactions by the account holder in such blocked accounts may, thereafter, be permitted once the self-certification is obtained and due diligence completed,” it added. FATCA of the US makes it mandatory for overseas financial institutions to give information about non-resident US account holders or face withholding tax. An inter-governmental agreement between India and the US was signed in August 2015 for the implementation of the FATCA, to ensure tax is paid on the income generated from abroad.
Under Indian income tax rules, financial institutions have to obtain self-certification and carry out due diligence in respect of all individual and entity accounts opened between July 1, 2014, and August 31, 2015. This was required to have been done by August 31, 2016, failing which the accounts were to be blocked. The Central Board of Direct Taxes had on August 31, 2016, indefinitely extended the deadline for complying with the self-certification norm.