FATCA Compliance India
FATCA Compliance India: The United States and India First entered into a Double Taxation Treaty in 1989 and then a FATCA Agreement (in substance) in 2015. FATCA is the Foreign Account Tax Compliance Act. It requires each country to report account holders to the other country.
The purpose is to ensure that, for example, a U.S. person with foreign accounts in India is properly reporting their foreign accounts to the U.S. government with the IRS tax return.
The overall goal of Foreign Accounts Compliance is to minimize and eliminate offshore tax evasion between the two countries.
We will summarize the basics of the FATCA India Reporting Agreement.
Foreign Financial Institution (FFI) Requirements
Foreign Financial Institutions or FFIs are required to report U.S. account holder information to the U.S. government, and vice-versa.
For example, if Michael is a U.S. Legal Permanent Resident and has an account at ICICI or SBI for example then ICICI or SBI is required to report the account holder information, balances, and other information to the IRS.
U.S. Taxpayer Reporting & FATCA India
When a Taxpayer meets the threshold requirement for FATCA, they are required to report the institution, balance and income information on Form 8938.
In addition, to the 8938 Form, Taxpayers may have other reporting requirements as well, including:
- FBAR (FinCEN Form 114)
- Form 3520
- Form 3520-A
- Form 5471
- Form 8621
- Form 8865
These penalties may be avoided and/or abated with voluntary disclosure or reasonable cause.
What is CRS?
CRS is the Common Reporting Standard. It is similar to FATCA, and sometimes referred to as GATCA (Global Account Tax Compliance Act). The CRS requirements are similar to FATCA, but the U.S. is not a part of CRS.
When a taxpayer receives a FATCA Letter, it is sometimes titled a FATCA CRS Letter.
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