(Image source from: Indo-US pact of IGA to Implement FATCA})

Indian government has reportedly decided to sign an Inter Governmental Act (IGA) with US for implementing the Foreign Account Compliance Act (FATCA), this agreement enables the exchange of information on cases of tax avoidance through overseas entities. The pact would also ensure that Indian corporates would not have to pay 30 per cent withholding tax on their US income.

The government also decided to join the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Information (AEOI). The move helps the Indian authorities to get the information from the US and from other countries’ jurisdictions with which India has entered into an agreement for AEOI about the assets of Indians held abroad including through entities in which Indians are beneficial owners.

The decision by the government can also result in Financial Institutions present in India will automatically become FATCA compliant and they do not need to enter into separate agreements with the US to avoid 30 per cent withholding on their US income.

The PM Narendra Modi at the G20 summit on November 16, 2014 in Brisbane, emphasized the AEOI and mentioned that this agreement would be instrumental in getting crucial financial information about unaccounted money by the tax evasioners and black money circulators. Till now, 52 countries all over the world have signed the MCAA on AEOI and many more countries are going to sign the MCAA.

-Kannamsai