India, U.S. to sign tax pact Thursday - sources

NEW DELHI (Reuters) - India and the United States will sign a tax information sharing agreement on Thursday, under a new U.S. law meant to combat offshore tax dodging by Americans, two Indian government sources and a source at the U.S. embassy said.

Washington has so far signed pacts covering more than 80 tax jurisdictions to implement the Foreign Account Tax Compliance Act 2010, or FATCA, requiring financial institutions to share information about Americans' accounts worth more than $50,000.

By signing the agreement, India hopes to garner Washington's support for its own efforts to bring back illicit funds stashed by Indians in foreign tax havens and boost revenues.

Last year, Prime Minister Narendra Modi joined leaders of G20 countries in Australia in agreeing to countries automatically exchanging tax information on a reciprocal basis by the end of 2018.

Under the agreement, banks, mutual funds, insurance, pension and stock-broking firms will report their American client details to the tax department for sharing with the U.S., said a finance ministry official, who declined to be named.

Investors will have to provide correct information about their tax residency and financial assets that would be shared with U.S. tax authorities, he said. 

The agreement could result in a fall in investments from small U.S investors into India's equity and debt markets for some time, but would help putting a fear of punishment among tax evaders, said another official.

(Reporting by Manoj Kumar; Editing by Nick Macfie)