CBDT’s Revised Guidance Note on Reporting Requirements under Income Tax Rules 114F~ Rule 114H (FATCA & CRS)
CBDT has issued revised/ updated version of Guidance Note for compliance with FATCA & CRS Reporting Requirements under Income Tax Rules 114F ~ 114H for help of the Financial Institutions, Regulators and officers of Income Tax, on 30 Nov. 2016.
The use of offshore financial accounts for tax evasion and avoidance is a pressing concern for governments all around the world. There is an international consensus that the domestic measures taken to address this problem must be supplemented by enhanced cooperation amongst governments including exchange of tax information on automatic basis. India has taken a leadership role in this area.
India has joined Multilateral Competent Authority Agreement to implement Automatic Exchange of Information (AEOI) based on Common Reporting Standard (CRS) and is one of the ‘early adopters’ to the international standard on automatic exchange of information. From the year 2017, 56 countries including India, will start sharing tax information on automatic basis and the number will increase to more than 100 in the year 2018. India has also signed Inter-Governmental Agreement (IGA) with the USA for implementing the ‘Foreign Account Tax Compliance Act (FATCA)’ enacted by the USA. These developments will enable the Indian tax authorities to automatically receive information of Indian residents who have stashed assets in foreign participating jurisdictions. This exchange of information is reciprocal and India also needs to provide information to other participating jurisdictions about their residents holding assets in India.
For implementation of FATCA and CRS in India, necessary legislative changes have been carried out in the Income-tax Act, 1961 and the Income-tax Rules, 1962 so as to collect and provide relevant information to the foreign tax authorities. A Guidance Note for the purpose of providing guidance to the Financial Institutions, Regulators and officers of the Income Tax Department was issued on 31 Aug. 2015, which was further revised/ updated last on 31 Dec. 2015 and 31 May 2016. This is fourth version of the Guidance Note which is issued by the CBDT. This version incorporates all subsequent clarifications that were issued by CBDT and also includes the updated procedure for registration and submission of reports by the financial institutions.
An attempt has been made in this Guidance Note by the CBDT to discuss and describe the various provisions contained in the relevant Rules notified by the Government of India. In case of unlikely event of any inconsistency between the Rules and Guidance Note, the statutory position contained in the Rules shall prevail.