If you have made any investment in a fixed deposit or a mutual fund or even in shares, by now, you must have received a form in the mail requiring you to comply with FATCA regulations. What is this new compliance requirement exactly and what does it mean so far as your investments are concerned?
Every government across the length and breadth of the globe desires to catch hold of money flowing out of their country specifically for avoiding taxes. With this aim, India has signed an Inter-Governmental Agreement with the USA under their Foreign Account Tax Compliance Act (FATCA) effective from 1.9.15.
Consequently, many ‘reportable’ persons in both the countries have started receiving inquiries related with their assets and income causing some anxiety. This is an attempt to give such persons the most desired related information.
In other words, this entire FATCA issue is applicable to you only if you are a tax resident or otherwise taxable in the USA. If not, then you just have to tick the NO box in the form and send it to the agency concerned and that would be the end of the story. However, those who are under the tax jurisdiction of the USA, please read on.
FATCA Details —
What Needs to be Reported:
Reporting Deadlines
Consequences of FATCA
A more immediate consequence of FATCA would be that currently all people who are tax resident of the US or otherwise taxable in the US would redeem / sell their investments in off shore locations (including in India) – just so that they don’t get trapped in the long tentacled arms of FATCA. In fact this is one of the reasons that the markets are taking time to recover – the much needed liquidity in terms of infusion of funds for a rise in valuations is just not coming – not only because of a slump in global demand but also on account of draconian regulations such as FATCA. It is hoped that the US leadership takes note of such unintended consequences and takes necessary actions.
(The authors may be contacted at wonderlandconsultants@yahoo.com)
