India signs the Inter-Governmental Agreement with the United States of America to implement Foreign Account Tax Compliance Act to promote transparency on tax matters
Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 by the Government of the United States of America (GO US) with a view to combat tax evasion by U.S. citizens and residents through the use of offshore accounts.
FATCA requires financial institutions (i.e. Banking and Insurance companies, Custodial Institutions, Asset Management Companies, etc) across the globe to share information about the financial accounts (i.e. depository account in case of Banks, insurance/ annuity contract in case of insurance companies, custodial account in case of custodial institutions, etc) held by U.S. citizens and residents, with the Internal Revenue Service (IRS) of the United States of America (USA).
To enable financial institutions in India to comply with FATCA, the Government of India (GOI) signed an Inter Governmental Agreement with the GO US on 9 July 2015 (India IGA). In addition to this agreement, a memorandum of understanding is also entered into between the GOI and the GO US with respect to certain terms used in the India IGA for compliance with FATCA.
The India IGA agreement shall enter into force on the date of India’s written notification to the USA that India has completed its necessary internal procedures for enforcing the India IGA.
India proposes to complete the internal procedures at the earliest with a goal of having the India IGA enter into force on 30 September 2015.
This alert summarizes the terms of the India IGA entered into between GOI and the GO US