Mutual funds industry body Amfi has said the investor accounts would continue to earn the returns and other benefits accruing even when the folios are ‘freezed’.
However, any further transactions would be permitted for these accounts only after the regulatory requirements are met to lift the ‘freezing’.
The statement follows reports suggesting that 50 lakh mutual fund folios are facing risk of closure due to non- compliance with tax information sharing law FATCA (Foreign Account Tax Compliance Act) involving redemption value of over Rs 1 lakh crore.
In a statement Amfi said that the term ‘freezing of accounts’ does not mean ‘impounding of accounts’.
It explained that when a folio is ‘freezed’, the investors account would continue to earn the returns/benefits accruing in the normal course.
Folios are numbers designated to individual investor accounts, though one investor can have multiple folios.
“Freezing of accounts in mutual fund parlance merely means permitting further transaction in the account only after the requirement is fulfilled, which in the context of FATCA compliance, is to provide a self-certification about one’s tax residency.
“It is pertinent to mention here, when a folio is ‘freezed’, the investor’s account would continue earn the returns/benefits accruing in the normal course. For FATCA compliance, all that the investors need to do is to provide a simple self-certification in the prescribed form that helps determine whether the investor has tax residency in other countries, particularly the US,” Amfi noted.
FATCA rules requires the Indian foreign financial institutions to provide necessary information to Indian tax authorities, which will then be transmitted to the US automatically.
Under the FATCA norms, the information should be collected by mutual fund houses from investors. The deadline for furnishing such information is reportedly August 31.
“For FATCA compliance, all the investors need to do is to provide a simple self-certification in the prescribed form that helps determine whether the investor has tax residency in other countries, particularly the US,” Amfi said.
Mutual Funds and their registrars have been making concerted and persistent efforts to obtain FATCA self-certification from the investors through various mode since FATCA compliance became law.
For the ease and convenience of investors, mutual fund registrars CAMS, Karvy and Sundaram BNP Paribas have facilitated submitting a single FATCA self-certification form for all the mutual funds serviced by the respective RTAs through an online mode wherein an customer could provide the information online through a specified link.