Sharing and Reporting of accounts and income has become a hot topic among NRIs and there is a lot of confusion about whether, when , which information, why, how India will share  the information.

India will soon be sharing the information of financial accounts and income generated in India but owned by resident of foreign countries (NRIs/PIOs). This blog analyze the agreement signed by India, CBDT notification and tries to answer these questions.

Agreements signed by India

On July 9, 2015, India signed the Foreign Account Tax Compliance Act (FATCA) agreement with USA and agreed to share the financial information of US based Non-Resident Indians (NRIs).

On June 3, 2015, India signed Multilateral Competent Authority Agreement (MCAA). The MCAA is based on the The Common Reporting Standard (CRS), formally referred to as the Standard for Automatic Exchange of Financial Account Information in Tax Matters. It is an information standard for the automatic exchange of information (AEoI), developed by the Organisation for Economic Co-operation and Development (OECD) and G20 countries. The idea is based on the USA FATCA implementation agreements.Chennai Investment

As of December 3, 2015, 75 countries have signed MCAA and will be sharing the data among themselves.  India is using this opportunity to gather financial information for NRIs from ALL countries.

Under US -India FATCA agreement, India will report financial information from July 1, 2014; whereas under MCAA, India will exchange information on financial accounts existing in 2016 (i.e. January 1, 2016).

CBDT Notification 62/2015:

On August 7, 2015, Central Board of Direct Taxes (CBDT) published rules and procedures for Reporting Financial Institutions (“RFI”) for maintaining and reporting certain financial information of NRIs.

Rule 114F – Definitions

Rule 114G – Information to be maintained and reported

Rule 114H – Due Diligence Requirements

The information to be reported and due diligence as well as reporting requirement are different for different years and resident country of NRI, whether USA or other.

The Financial Institution will first need to perform due diligence and identify whether an account is a reportable account i.e. owned by an NRI and from which country and thereafter report the financial information as requested.

Rule 114H: Due diligence requirement:

I have already covered due diligence procedures for lower value and high value accounts of in my previous blogs. While due diligence is to be performed for NRIs from all countries, the threshold, deadline, etc. are different for NRIs from US and non-US countries and are summarized in following table:

Particulars

US Reportable Account

Non-US Reportable Account

Year of Reporting

30th June, 2014 and 31st December of any subsequent year

31st December 2015 or any subsequent year

High Value Account

>US $ 1million

> US $ 1 million

Lower Value Account

US $ 50,000 – US $ 1,000,000

0 – US $ 1,000,000

New Account

Opened on or after July 1, 2014

Opened on or after January 1, 2016

Pre-existing account

Account as on June 30, 2014

Account as on December 31, 2015

Review of High Value Pre-existing account

To be completed by December 31, 2015

To be completed by June 30, 2016

Review of Low Value Pre-existing account

To be completed by June 30, 2016

To be completed by June 30, 2017

Rule 114G: Information to be reported

As per the notification the following information will be reported to the Income tax department.

Particulars

2014 (US resident NRIs only)

2015 (US resident NRIs Only)

2016 (All NRIs)

2017 and beyond (All NRIs)

114G(a)

Name, AddressJinnai Wealth Management

114G(a)

Taxpaer ID (country of Residence)

114G(a)

Date and Place of BirthNagpur Stock

114G(c)

Account Number

114G(d)

Account Balance at calendar year end or before closure

114G(e)(i)

Gross income (interest, dividend, capital gain) in custodial accounts (e.g. PIS account)

114G(e(ii)

Gross Sale proceeds or redemption in Custodial accounts

114G(f)

Gross interest from deposit account

114G(g)

Gross amount paid/credited except in (e) and (f) accounts

114G(h)

Payment to non-participating Financial Institution

Important Points

Financial Information of account owned by Not only US residents but NRI from all countries will be reported.  (US Residents:  from 2014; other countries: from 2016). So, NRIs from non-US countries have until December 31, 2015 to regularize/ report their Investments in India.

Tax payer identification number in the country of residence (US residents: Social Security Number (SSN); UK residents: National Insurance (NI); Australian Resident: Tax File Number (TFN), etc.) and place of birth are to be obtained latest by December 31, 2016.

The financial institution may not reply on a self-certification or documentary evidence if RFI knows or have reason to know that it is incorrect or unreliable.

If account is jointly held, each holder is attributed ENTIRE balance for applying aggregation requirement.

The Financial Institution will aggregate all financial accounts maintained by it or by a related entity that can be linked with computerized system with unique number such as PAN or Customer ID. (RBI has already implemented unique customer ID code).

All accounts – Savings, Current , Cash Credit/Overdraft, FD/ Term Deposits; Term, Endowment, Annuity, ULIP, Money Back, or Whole Life Insurance Policies; PIS, demat or trading accounts, Mutual Fund investments; Beneficiary or Clearing Member Account or other account are covered and will be reported.

The required information of the accounts will be submitted online with data structure under digital signature and reported to the Director or Jt. Dir. of Income Tax (Intelligence and Criminal Investigation).

If there is no reportable account, a NIL report is also required to be submitted.