Bank accounts released between 1st July 2014 and 31st august 2015 have to present self-certification by 30th April to obey with FATCA i.e. Foreign Tax Compliance Act provisions, without which the account would be blocked as per the wordings of Income Tax Department.
CBDT i.e. Central Board of Direct Taxes alleged in a statement that ‘ the account holders may be clued-up that in case self-certifications are not given until 30th April 2017, the accounts would be blocked and which would signify that the financial institution would prescribe the account holder from carrying out any transaction with respect to such accounts’.
India has entered into conformity with the US for completion of the FATCA with the outcome from 31st august 2015. As per managing partner, Nangai and company ‘Newer accounts by now have to know your customer norms’. The FATCA needs Fls outside the US to report on the foreign assets held by their non-resident US account holders to be subject to preservation of tax. Fls in India are required to present this information to the CBDT which in turn deliver it to the US authorities.
The financial institution would proscribe the account holder from effecting any transaction with respect to such accounts. On the other hand, the transactions by the account holder in such blocked accounts may after that be acceptable once the self-certification is attained and due diligence accomplished. CBDT also alleged that financial institutions should formulate all efforts to get hold of the self-certification.
IGA i.e. the Inter-Governmental Agreement with the USA for completion of FATCA entered into force on 31st August 2015. Under the another process provided in Rule 114H 8 of the Income-tax Rules 1962, the financial institutions need to attain self-certification and hold out due assiduousness in respect of all individuals and entity accounts opened from 1st July to 31st august.
These credentials with self-certification were requisite by the financial institutions by 31st August 2016 otherwise they were required to close accounts and report the same if found to be a reportable account as per the prescribed due diligence process for a preexisting account.
CSDT alleged that in view of intricacy highlighted by stakeholders on the subsequent provisions for closure of financial account it was well-versed on 31st August 2016 that the financial institutions may not close the accounts by 31st august 2016 in respect of which self-certifications have not been attained under the alternative process and a revised timeline shall be informed in due course. The financial institutions were also directed to continue to work on finishing the obligatory due diligence comprising obtaining self-certifications.