RBI asks financial entities to be ready to comply with FATCA

The Reserve Bank today asked all banks and financial institutions to be prepared for the implementation of due diligence and reporting standards under FATCA and CRS meant for international tax compliance.
The government has signed the Inter-Governmental Agreement (IGA) with the US for improving International Tax Compliance and implementing the Foreign Account Tax Compliance Act (FATCA).
India has also signed a multi-lateral agreement this year to automatically exchange information based on Convention on Mutual Administrative Assistance in Tax Matters under the Common Reporting Standard (CRS) or the Standard for Automatic Exchange of Financial Account Information (AEoI).
"All the regulated entities should take action appropriately for implementation of due diligence and reporting requirements as laid down in the rules and ensure compliance," the RBI said in a notification.

The IGA between India and the US is expected to come into force on August 31, 2015.
It said the reporting should be in a manner that lends itself to credible auditability including audit of the IT system which should be suitably upgraded to not only maintain the information required under the rules but also to record and store the due diligence procedures.

Government earlier this month notified the amendments to Income Tax Rules for operationalisation of IGA and CRS.
The RBI said all the concerned financial institutions should register on the related e-filing portal of Income Tax Department as Reporting Financial Institution by submitting the requisite details.

In this regard, Central Board of Direct Taxes (CBDT) is developing a scheme, which would be shared with all the regulated entities shortly, the RBI added.
"CBDT is in the process of issuing a detailed guidance note detailing the reporting requirements. The respective Financial Institution by going through the rules should determine whether they are Reporting Financial Institution or not and whether they are falling within one of exemptions," it added.
It further asked all the financial entities to develop their IT system for carrying out due diligence procedure and also for recording and maintaining it.
The RBI said non-compliance of the rules can lead to huge penalties in addition to loss of reputation.

"It is incumbent on the Chairperson/CEO of the RBI to form a High Level Monitoring Committee under the Designated Director or any other equivalent functionary to ensure that the reporting entities are in a position to meet all the deadlines for completing due diligence procedure and for reporting requirements," it added.