The government has extended the deadline for closure of accounts that are non-compliant under the US’s Foreign Account Tax Compliance Act (FATCA).
For providing immediate relief to the account holders and in wider public interest, it has been decided that the financial institutions may not close the accounts by 31 August 2016 in respect of which self-certifications have not been obtained under the alternative procedure.
The revised timelines for completing due diligence in respect of such accounts shall be notified in due course.
India and the US are working out a new deadline to ensure that the accounts that have not been self-certified do not have to be closed by 31 August.
What is FATCA?
FATCA is a US law that requires financial institutions like banks, insurance companies and mutual funds in other countries to disclose details of their clients’ income, and if they are US residents or have a tax residency in the US.
The US had signed an inter-government agreement with many countries including India that mandated financial institutions obtain self-certification that such accounts are not held by US citizens and check if these self-certifications are correct.
Financial institutions had to do this for all individual and entity accounts opened from 1 July 2014 to 31 August 2015 by end-August.
In case such self-certification was not carried out, they were required to close the accounts and report the same to the tax authorities.
