SKP Tax Alert
Volume 10 Issue 5 | 17 April 2017
FATCA non-compliances to result in suspension of account activity; CBDT sets 30 April 2017 as the compliance due date

Under the Intergovernmental Agreement (IGA) signed between India and the USA, financial institutions are required to undertake due diligence and reporting requirements in accordance with the Foreign Account Tax Compliance Act (FATCA) Law.  

The IGA entered into force on 31 August 2015. Rule 114H(8) of the Income Tax Rules, 1962 provided that for all accounts opened from 1 July 2014 to 31 August 2015, self-certification from the account holders should be obtained by 31 August 2016. Considering the practical difficulties faced by the taxpayers, the Central Board of Direct Taxes (CBDT) announced that the timeline of 31 August 2016 will be relaxed and revised timelines for undertaking this compliance will be notified.

The CBDT in a recent press release[1] has announced that the last date for obtaining self-certification from account holders is 30 April 2017. This timeline applies to accounts opened between 1 July 2014 and 31 August 2015. If a customer fails to provide the self-certification by 30 April 2017, the customer account will be blocked. This would mean that the financial institution will prohibit the account holder from effecting any transaction with respect to such accounts. Once the self-certification documents are obtained and the due diligence procedures are completed, the customer will be able to carry out transactions through his account.   
 
[1] Issued on 11 April 2017
SKP's Comments
The press release provides that non-compliance by the customers will result in a temporary block of the customer’s account till the compliances are completed, but the account is not required to be closed. 

The compliances need to be completed by 30 April 2017. The compliance window, therefore, is narrow. This will require reporting entities under FATCA to complete the self-certification requirements on priority.

It is also important to note that while the above clarification is silent for the accounts opened after 31 August 2015, it would be preferable to obtain self-certification documents from the customers even in cases of accounts opened after 31 August 2015.
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