Cabinet approves signing deal with US on tax compliance

The union cabinet on Tuesday approved the signing of an inter-governmental agreement between India and the US for implementing the Foreign Account Tax Compliance Act (FATCA).

Sources said the cabinet meeting also approved India joining the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Financial Account Information (AEOI).

The decision will enable the government to receive information from the US and from other jurisdictions with which India has entered into agreements for AEOI as per CRS (common reporting standards) about assets of Indians held abroad including through entities in which Indians are beneficial owners.

The sources said it will help the government curb tax evasion and deal with the problems of black money.

They said it will also result in financial institutions in India being FATCA complaint and they will not be required to enter into separate agreements with the US to avoid 30 percent withholding on their US source of income.

Till now, MCAA and AEOI have been signed by 52 countries.

The sources said the government has taken a leading role in international fora towards building a consensus among major economies that the problem of offshore tax evasion and flow of illicit money can be addressed only by free flow of financial account information to be exchanged among countries on automatic basis.

Prime Minister Narendra Modi, during the G20 summit in Brisbane last year, had supported AEOI and said it will be instrumental in getting information about unaccounted money stashed abroad and its repatriation.