To check offshore tax evasion, India and the US today 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 here 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.