This article examines the Foreign Account Tax Compliance Act law (FATCA) and also clears the significant impact the law has had on Americans abroad. Foreign Account Tax Compliance Act (FATCA) came into existence to fight with tax avoidance and to ensure strict consistency to tax rules. In short, we can say that it is an attempt to track US citizens earning from other countries investments and hidden assets in that countries. FATCA allows an automatic exchange of financial information between the US and India. The Indian financial institutions have to provide required information to the Indian tax authorities, which will then be forwarded to the US authorities. On August 31, 2015, IGA (inter-governmental agreement) with the US implemented FATCA.  FATCA allows to financial institutions to hold back tax if any US persons decline to meet the documentation requirements. For this purpose, all financial institutions which are registered under this Act should immediately inform the US tax department when they come across US persons attempting to evade tax and the government of India also made it compulsory for all NRI who wants to invest from the US to self declare FATCA compliance through Form 61B, as per Income Tax Rules of 114F and 114H. Hence, all registered bank under FATCA report such account holders immediately. This Act has a profound and direct impact on US multinationals and Foreign Financial Institutions. An NRI’s who are living in USA and investing in Indian assets will have to stick on to the Foreign Account Tax Compliance Act laws. These laws require financial institutions to state details of accounts held by US citizen or taxpayers. FATCA law also requires a self declaration from NRIs who are living in the USA while making any investments in India. Under the of Rule 114H(8) of the Income Tax Rules, 1962, an alternative procedure provided to the financial institutions to obtain the self certification and carry out due diligence procedure to establish the reasonableness of the self-certification in regard of all entity and individual accounts opened from 1st July 2014 to 31st August 2015. NRI’s investments that are subject to reporting and taxation in the US include public provident fund, fixed deposits, mutual funds, stocks, other capital gains, bank interest, and retirement contributions.

FATCA declaration for NRIs

FATCA was came into effect from January 2016 and becomes compulsory for all NRI or Indian investors to file a FATCA self declaration. The details can be a little different with each financial institution, the standard information FATCA declares are :

  1. Name
  2. Permanent Account Number
  3. Address
  4. Place (city/state) of birth
  5. Country of birth
  6. Nationality
  7. Gross Annual Income
  8. Occupation