The US has given India time till September 30 to put in place a framework to track down the assets that nationals of each country hold in the other nation without reporting to domestic tax authorities.
Sources told FE that the new information-sharing agreement between the Income-Tax Department and the IRS under the US Foreign Account Tax Compliance Act (FATCA) would be signed in New Delhi and come into force from October 1.
The deadline has so far been extended twice, considering the lengthy consultation India has to do with various financial sector regulators.
Under the agreement, insurance, banking, pension and stock-broking firms have to report their US client details to the Income-Tax Department for eventual sharing with its treaty partner.
The idea is to capture details of US taxpayers’ unreported foreign financial accounts, stock, securities, mutual funds and insurance or annuity schemes with a cash value above $50,000. FATCA mandates all US citizens, residents and non-resident citizens to report their foreign accounts at the end of the tax year as America follows a system of taxing the world-wide income of its people. India, on the other hand, taxes the worldwide income of only its residents, while non-residents are taxed only on the income sourced from India.
The extension of the deadline removes fears of American financial institutions imposing a FATCA-mandated 30% penal withholding tax on payments made to Indian clients in the absence of the inter-governmental agreement.
Finance minister Arun Jaitley, who announced a new Bill proposing jail term for Indian nationals failing to report foreign assets, is preparing a major integration of database available with direct and indirect tax authorities to zero in on instances of evasion.
Central Board of Direct Taxes chairperson Anita Kapur said adoption of GST will provide a nationwide data base of a large number of transactions, which, along with customs and income-tax database, will be made accessible to all departments in a much more intensive manner.