India clamps down on tax evasion among US bank account holders India clamps down on tax evasion among US bank account holders

India clamps down on tax evasion among US bank account holders
29 Jan 2018

India's income tax department is starting to target senior executives with US bank accounts, acting on information that the US is sharing with India under its Foreign Account Tax Compliance Act (Fatca).

As a result, people with US bank accounts are now receiving enquiry notices from the Directorate General of Income Tax (Intelligence & Criminal Investigation), potentially opening them up to prosecution on charges of concealing black money overseas, according to local reports.

The Undisclosed Foreign Income And Assets (Imposition of Tax) Act makes this a criminal offence, with offenders punishable by up to 10 years imprisonment and a 120% tax, which effectively means asset confiscation.

What is Fatca?

Fatca was enacted by the US in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act. It was intended to combat tax evasion by US nationals holding investments in offshore accounts. Signatories to the agreement are required to share information on any financial investment by a US citizen residing in their country and vice versa.

Who is being targeted in India?

Queries are mostly believed to relate to dividends, interest income and deposits in the bank accounts of individuals who have spent some time in the US. It is not clear how many such notices have been sent out.

What do the letters say?

The tax authorities are asking recipients whether the schedule of financial assets was filed with their income tax return, along with declarations of dividend and interest earned in the US. Individuals have also been asked to explain their residency status. Those who fail to respond face a fine.

What should recipients do?

Anyone receiving such a notice should be careful to ensure an accurate response, warned PwC partner Kuldip Kumar, as any misreporting is likely to be discovered. "With the elevated use of technology and data analytics, such linking of information would be more of routine rather than an exception," he said.

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

India's income tax department is starting to target senior executives with US bank accounts, acting on information that the US is sharing with India under its Foreign Account Tax Compliance Act (Fatca).

As a result, people with US bank accounts are now receiving enquiry notices from the Directorate General of Income Tax (Intelligence & Criminal Investigation), potentially opening them up to prosecution on charges of concealing black money overseas, according to local reports.

The Undisclosed Foreign Income And Assets (Imposition of Tax) Act makes this a criminal offence, with offenders punishable by up to 10 years imprisonment and a 120% tax, which effectively means asset confiscation.

What is Fatca?

Fatca was enacted by the US in 2010 as part of the Hiring Incentives to Restore Employment (HIRE) Act. It was intended to combat tax evasion by US nationals holding investments in offshore accounts. Signatories to the agreement are required to share information on any financial investment by a US citizen residing in their country and vice versa.

Who is being targeted in India?

Queries are mostly believed to relate to dividends, interest income and deposits in the bank accounts of individuals who have spent some time in the US. It is not clear how many such notices have been sent out.

What do the letters say?

The tax authorities are asking recipients whether the schedule of financial assets was filed with their income tax return, along with declarations of dividend and interest earned in the US. Individuals have also been asked to explain their residency status. Those who fail to respond face a fine.

What should recipients do?

Anyone receiving such a notice should be careful to ensure an accurate response, warned PwC partner Kuldip Kumar, as any misreporting is likely to be discovered. "With the elevated use of technology and data analytics, such linking of information would be more of routine rather than an exception," he said.

Emma Woollacott is a freelance business journalist. Her work has appeared in a wide range of publications, including the Guardian, the Times, Forbes and the BBC.

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