Sebi consulting market intermediaries on FATCA pact

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Market regulator Sebi is consulting intermediaries regarding an inter-governmental agreement to be signed between India and the US under the Foreign Account Tax Compliance Act.

The Securities and Exchange Board of India (Sebi) is likely to meet stock brokers this week, according to officials. Earlier, the regulator met mutual fund houses and foreign institutional investors.

The proposed agreement is part of the US administration's efforts to combat possible tax evasion by its residents through foreign accounts in India and other countries.

The US is signing these agreements with various countries under a three-year-old law, known as the Foreign Account Tax Compliance Act (FATCA), which is aimed at combating tax evasion by US persons and companies holding accounts and other financial assets abroad.

Sebi is considering the draft Inter-Government Agreement (IGA).

The Finance Ministry had earlier asked banking regulator RBI's views and suggestions on the proposed IGA.

A final IGA will be prepared by the Finance Ministry after taking into account the views and suggestions of Sebi, RBI and other stakeholders. The FATCA agreement is expected to come into force in January 2014.

Once implemented, the agreement would provide the US tax department, the Internal Revenue Service (IRS), access to details of all offshore accounts and assets beyond a threshold limit held by Americans here, while a reciprocal arrangement could be offered for Indian authorities as well.

Starting at $50,000, the threshold limit varies for different classes of entities.

The US has signed similar bilateral agreements with countries including the UK and Switzerland, while talks are on with over 50 jurisdictions, including India.

Once the FATCA pact is implemented, non-compliant entities and persons would be subject to heavy penalties.