I-T clarification on US tax law enforcement

All upcoming Fatca reporting in May 2016 will have to be done in rupees

The income tax department clarified that all the upcoming reporting in May 2016 for the purpose of adhering to the US Foreign Account Tax Compliance Act (Fatca) will have to be done in rupees.

For 2017, the forms would be suitably modified to include other currencies.

The clarification came because in the first reporting in September 2015, some banks had reported in rupees and others in dollars, explained Bahroze Kamdin, partner, Deloitte Haskins & Sells LLP.

This would supersede the earlier circular that the value of an account in question should be reported in the currency in which it is denominated. “So, this clarification could impact those financial institutions which have created their systems for reporting in dollars and will entail time and cost to make changes to the systems designed or being designed,” said Kamdin.

The department also clarified that all fixed deposits and auto sweep facilities in pre-existing savings bank accounts will not have to be reported in relation to Fatca and the Common Reporting Standards (CRS) of the Organization for Economic Cooperation and Development (OECD).

The government had signed a treaty with its US counterpart last July to enforce Fatca requirements here. The law is meant to track the foreign accounts of American citizens. CRS had the same aim, having been formulated by OECD and the G-20 countries as a basis for automatic tax information exchange through respective bilateral treaties.