Clarification for implementation of FATCA and CRS

Clarification for implementation of FATCA and CRS 

An Inter-Governmental Agreement between India and USA was signed for implementation of Foreign Account Tax Compliance Act (FATCA). The Government of India has also joined the Multilateral Competent Authority Agreement (MCAA) for Automatic Exchange of Information as per Common Reporting Standard (CRS). To provide guidance for implementation of FATCA and CRS, a Guidance Note was released on 31st August 2015 which was subsequently updated on 31.12.2015.

 
Based on comments and feedback received from the financial institutions, a clarification has been issued in this month. The same has been placed on the Income-tax website http://www.incometaxindia.gov.in.

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F.No. 504/090/2007-FTD-I
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
(Foreign Tax & Tax Research Division)
*****
19th February, 2016
Clarifications for implementation of FATCA and CRS
Currency
For the upcoming reporting in March 2015 and May 2016, all reporting has to
be done in INR. For the reporting in 2017, Form 61B and Schema will be suitably
modified to include a field for capturing type of currency
New Fixed Deposit account as Preexisting Account
2.1 In banking system, there are procedures where Fixed Deposit (FD) can be
opened by an existing customer who is having an existing saving bank account with
the same financial institution, without any additional documentation. These fixed
deposits are assigned separate account numbers from the existing saving bank
account. Therefore, they are classified as new accounts by the banks.
2.2 During stakeholders consultations, representatives of financial institutions
informed that in such cases, no additional documentation are obtained for these fixed
deposits accounts as they are intrinsically related to existing saving bank account and
all KYC documents are available for the existing saving bank account.
2.3 In these cases, where no additional documentation are required for certain FD
accounts, financial institution may treat the new FD account as pre-existing account
subject to the following conditions:
a. the saving bank account is opened on or before 30.06.2014 in the case of
FATCA and 31.12.2015 in the case of CRS ;
b. the due diligence requirements have already been carried out or are in
the process of being carried out for the preexisting saving bank account and
c. the accounts are treated as linked or as a single account or obligation for
the purposes of applying any of the due diligence requirements and reporting.
2.4 The above situation will also be applicable to Auto sweep facility linked to
existing saving bank account. 
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Global Custodian and Local Custodian
3.1 It was submitted by financial institutions that majority of the accounts opened
in India by foreign investors, including Foreign Portfolio Investor (FPl), are
contracted through Global Custodians (GCs) who in turn appoint or contract with
Local Sub Custodians in India to facilitate registration and investments of these
foreign investors in India. Query was received whether Local Sub-custodian may
apply due diligence procedure only on the GCs and not on the GCs end-clients.
3.2 It has been decided that Local Sub-custodian are required to carry out the due
diligence on the accounts held by GC end-clients. However, for carrying out due
diligence, the Local Sub-custodian may rely on the KYC/FATCA/CRS documentation
done by GC for the account holders including the self-certification. Further, it may be
clarified that the obligations for due diligence and reporting remain that of the Local
Custodian who should also be able to access all documents in relation to an account
holder.
HUF
4.1 Several queries have been received regarding due diligence of HUF accounts.
The issue is whether due diligence may be conducted either only on the Karta or on all
coparceners alongwith Karta.
4.2 In this regard, it has been decided that for the purpose of compliance, an HUF
account shall be treated as an entity account. The due diligence of HUF accounts will
be same as prescribed under PMLA/ KYC procedures.
NBFC
5.1 Queries have been received regarding reporting by NBFC whether they are
depository institution or investment entity.
5.2 In this regard, it has been decided that an NBFC which accepts deposit in the
course of a banking business or a similar business as mentioned in the definition of
depository institution will be considered as Depository Institution and will report
accordingly. An NBFC which is working as investment entity, will report accordingly.
Procedure for furnishing the report
6. Presently the procedure for registration and submission of report under FATCA
and CRS is as per Notification No. 4 dated 4th September, 2015 issued by the Principal
Director General of Income Tax (Systems) which is available on the website of
Income tax Department incometaxindia.gov.in. However, the procedure for
registration and submission of report is being revised and the same will be made
available on the website referred above as and when rolled out.