With India and the US recently agreeing to implement the Foreign Account Tax Compliance Act (FATCA), NRIs in the US are in a bind. Many of then have already started to look at disposing property that they had acquired in India during the real estate boom. While some NRIs are transferring property to relatives, others are selling it outright. NRIs fear that over time their property details would be shared with the US. Under the agreement, the two countries will share information on assets, financial details and capital market investments of citizens in each others countries, according to a report in The Economic Times.
The law aims to make sure that tax is paid on the income generated from residents’ overseas wealth. As compliance norms under FATCA are stringent, NRIs find it makes better sense to exit than come under scrutiny. The fear of the implications of FATCA that is just being implemented is in sharp contrast to the mere 638 declarations that accumulated R4,147 crore under the Indian government’s three-month compliance window for declaring undisclosed foreign assets. Considering the fear that a US legislation can bring in, it is time the Indian government too got tough with tax evaders. There is a clear lesson in implementing tax laws here.