If you had opened a new mutual fund folio between Jul 1, 2014, and Aug 31, 2015, you were required to provide FATCA self-certification about your tax residency by 30th April 2017. If you have not done so, your folio would get blocked by the concerned mutual fund as per a government directive, and you will not be allowed to effect any transaction with respect to such accounts until you provide the self-certification. Therefore, if your transactions are not getting deducted through the ECS mode now, then check with the respective AMC to carry on with your regular investments which were started between Jul 1, 2014, and Aug 31, 2015.
FATCA or Foreign Account Tax Compliance Act is a United States (US) law aimed at prevention of tax evasion by US citizens and residents through the use of offshore accounts. The Inter-Governmental Agreement (IGA) signed between the US & Indian Governments for implementation of FATCA came into force on 31st August 2015. As per FATCA provisions, there are different rules for “pre-existing” and new accounts.
Under the alternative procedure provided in Rule 114H(8) of the Income Tax Rules, 1962, the financial institutions need to obtain self-certification and carry out due diligence in respect of all New accounts – whether in respect of an individual or an entity – opened from 1st July 2014 to 31st August 2015. Such self-certification and documentation were required to be obtained by the financial institutions by 31st August 2016, failing which they were required to close the accounts and report the same if found to be a “reportable account” as per the prescribed due diligence procedure for a pre-existing account.
Taking into account difficulties highlighted by stakeholders in following the provision for “closure” of financial accounts, the Government of India had extended the deadline of August 31, 2016, for obtaining the self-certifications till further notice. On April 11, 2017, the Ministry of Finance, Government of India issued a press release stating that in case the self-certifications are not provided by the account holders by April 30, 2017, the accounts will be blocked and that the financial institutions should prohibit the account holder from effecting any transaction with respect to such accounts. It is further stipulated that the transactions by the account holder in such blocked accounts may, thereafter, be permitted once the self-certification is obtained and due diligence completed.
(With inputs amfiindia website)