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Modi's global black money hunt hits fast lane

India can receive information on bank accounts held by Indians, from 56 nations this year

Sai Manish  |  New Delhi 

Black Money

In May 2016, Central Board of Direct Taxes (CBDT). while issuing the final guidelines on Foreign Account Tax Compliance Act (FATCA) noted, “The use of offshore financial accounts for tax evasion and avoidance is a pressing concern for governments all around the world. From 2017, 56 countries including India, will start sharing tax information on automatic basis and the number will increase to more than 100 in 2018. India has also signed Inter-Governmental Agreement (IGA) with the USA for implementing the enacted by the USA. These developments will enable the Indian tax authorities to automatically receive information of Indian residents who have stashed assets in foreign participating jurisdictions.”

Since these guidelines were issued, the US led initiative has found many more takers. Under FATCA, India will not just receive information about its residents in other countries but also give out information on a reciprocal basis to other nations who ask for it from time to time. On the anvil is the sharing of virtually every aspect of a bank account with India and various nations around the world once respective governments identify these accounts as requiring scrutiny.

Information that will now be shared between nations include the name, address, (TIN) or permanent account number (PAN) of the bank account holder. Other details include bank account number, date and the place of birth about the person on whom information is being sought. If India or any of the nations want, they will also automatically receive information about the account balance in the concerned account at the end of each financial year. In case the account was closed during the year, then India is entitled to receive (and to provide to other nations) information on the last balance before the closure of the account.

In case of custodial accounts set up in the name of someone but managed by someone else additional information can be sought by the government. These include the amount of interest paid to the account in addition to any dividends that have been paid into it.

Information exchanged under the new arrangements applies to individuals, corporations, partnerships, trusts and even unincorporated associations. Under the India-US agreement that came into force in 2015, India can provide information to the US on ‘high value accounts’ of US residents in India that have a balance of more than $1 million. In addition, the US can also get information on ‘low value accounts’ with a balance of between $50,000 to $1 million. The India-US agreement also provides for India to receive such information. The agreement states, “the Government of the United States of America collects information regarding certain accounts maintained by US financial institutions held by residents of India and is committed to exchanging such information with the Government of India and pursuing equivalent levels of exchange.”

While the agreement holds much promise in the exchange of information between the India and US, there are certain other roadblocks in store for the Modi administration in its global hunt for Indian tax evaders. While this year 56 nations will be exchanging information under FATCA, certain countries known to be offshore tax havens are yet to sign the Multilateral Competent Authority Agreement (MCAA). India had signed the MCAA in 2015. For instance, while nations like Mauritius, British Virgin Islands, Cayman Islands are signatories to MCCA. Others like Panama and Hong Kong are yet to come on board. This means that India cannot get information from these nations as of yet. Both Panama and Hong Kong are known to be preferred destination for money laundering and tax evasion by Indian residents and corporations.

First Published: Tue, May 02 2017. 14:42 IST