A new chapter 4 has been introduced in the US Internal Revenue Code by the Hiring Incentives to Restore Employment (HIRE) Act. On March 18, 2014 President Obama signed the HIRE Act, which includes certain tax incentives for hiring and retaining unemployed workers. To offset the revenue effects, the Act includes provisions of the Foreign Account Tax Compliance Act (FATCA), which are expected to generate substantial revenue for the US Internal Revenue Service (IRS). The ultimate goal of FATCA is to provide the IRS with information with which it can fight offshore tax evasion indulged by US individuals and US-owned entities.
FATCA has been enacted with the objective of preventing tax abuse by US taxpayers who have offshore financial accounts and to ensure that all citizens pay their fair share of taxes. FATCA requires a wide-range of non-U.S. financial intermediaries such as banks, brokers, investment vehicles such as hedge funds and private equity funds that own U.S. investments to obtain and report information pertaining to U.S. accounts to the U.S. Treasury or else suffer withholding tax @ 30% on US source income e.g. dividends, interest, royalties, rents etc. or any gross proceeds from the sale or other disposition of a property that can give rise to the payments of US source.
On July 9, 2015, Indian Government signed the inter-governmental Agreement (IGA) with the US Government for implementation of FATCA. Further the Organisation of Economic Cooperation & Development (OECD); a group of 62 member countries has developed a framework for automatic exchange of tax information based on the same model of IGA under US FATCA. On June 3, 2015, India signed the OECD’s common reporting standards (CRS). Thus the information OECD reportable accounts shall also be called by OECD countries.
Information/ guidance relating to FATCA & CRS is available on Income-tax website https://www.incometaxindia.gov.in.