FATCA in India

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Objective of FATCA ?

The US government has recently enacted Foreign Account Tax Compliance Act (FATCA), which is primarily intended to detect and thus discourage tax evasion by persons living and earning in United States.

What does FATCA Mandates ?

FATCA mandates reporting by US taxpayers about certain financial accounts and offshore assets and reporting by foreign financial institutions about accounts held by US taxpayers or foreign entities in which US taxpayers hold a substantial ownership interest.

Impact on Indian Banks

Indian financial institutions with overseas branches have time till 31st December’2014 to register. However, they should register for GIIN only when the formal Inter Governmental Agreement is signed.


Provisions of the FATCA may require the amedment in the Prevention of Money Laundering Act. This calls for the change in the syllabus of the Certified Anti Moneylaundering Expert (CAME) Program and from 1.1.2015, ie exactly after the date of obtaining the GIIN is over the syllabus of CAME would be changed to accommodate the provisions of FATCA in the course-ware.

Impact on Foreign Financial Institutions

FATCA will require FFIs to enter into an agreement with the US Internal Revenue Service (IRS) whereby they agree to:

  • Identify their US account holders;
  • Report certain information of such account holders annually to the IRS; and
  • Withhold tax on payments to recalcitrant US taxpayers and to non-participating FFIs and close accounts belonging to recalcitrant account holders.


Non-resident Indians (NRIs) living in US and having investments or assets in India are required to declare details of their earnings in India and pay tax thereon to the US government according to the laws of that country. Even if the income is earned in India and is exempt from income tax in India as per the Indian tax laws, it may not be tax free in US and it may be subject to local taxes. Under the new enactment, the IRS of US will get these details directly from the Indian government, so much so, it is advisable for all tax payers to collate this information meticulously and submit it to the US tax authorities to pre-empt any inquiries from them. But it is best to consult your local tax advisor in this regard and be guided accordingly.


Tax Havens

European Union finance ministers failed to agree on a sweeping new policy to fight tax evasion because of resistance from Luxembourg, a tiny country that long has prospered from a secretive banking culture. Luxembourg, is frequently referred to as the Tax haven.

Tax havens in different parlance are also termed as tax shelters, secrecy jurisdictions, international financial centers, or simply offshore.
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Leave Travel Concession scam by teachers

A `2-crore Leave Travel Concession scam involving 2,582 teachers has come to light in the Adilabad district of Andhra Pradesh. This comes close on the heels of the medical reimbursement scam. The education department detected the LTC scam while scrutinising the bills submitted by the teachers in 2010 to claim LTC amounts for travelling to their home towns. The teachers were found to have submitted fake bills without travelling and siphoned off amounts ranging from `8,000 to `50,000 each.

According to sources, the teachers are entitled to avail of Home Town LTC facility once in every two years. The travel charges of the teachers and their family along with other incidental expenses are reimbursed by the government. In this case, the teachers did not go on any tour but submitted fake bills. The fraud was committed by teachers in 40 mandals of the district, mainly Asifabad, Khanapur, Mudhole, Mamada, Laxmanchanda, Khagaznagar, Koutalla and Bhainsa mandals.

The education department proposes to issue show-cause notices to the teachers within the next three days. It is also looking into the possible involvement of department officials.

Source: Indian Express

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