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A circular issued by the Securities and Exchange Board of India on Monday said Indian financial institutions operating out of the US could register with American tax authorities till December 31, in line with the Foreign Account Tax Compliance Act (Fatca).
Introduced by the US tax department in March 2010, Fatca will come into effect from Tuesday. The Act aims to bring all income generated outside the US by the citizens of that country under the tax net. According to Fatca rules, financial institutions catering to US citizens have to register with the US government and disclose all investments by US clients through them. Non-disclosure of such information could lead to a 30 per cent withholding tax.
The Sebi circular said the registration of Indian financial institutions doing business in the US must be carried out only after an inter-governmental agreement (IGA) was is signed between India and the US.
“Indian financial institutions have time up to December 31, 2014, to register with US authorities and obtain a global intermediary identification number (GIIN)… Registration should be done only after the formal IGA is signed. Information in this regard will be communicated to you," read the circular, meant for stock brokers, mutual funds, portfolio managers, depositories, stocks exchanges, etc.
India has so far only agreed to follow the FATCA guidelines in-principle and is yet to sign the IGA.
