In August 2015, The RBI issued a statement that bade Financial institutions and Banks in the country to be equipped with due requirements to meet with the FATCA, with the Indian Government signing the Inter-Governmental Agreement (IGA) with the US. FATCA necessitated India, as a signatory, to have its financial institutions comply with due diligence procedure as a step towards improving International Tax Compliance.
The Foreign Account Tax Compliance Act (FATCA) of USA enforces requirement for United States persons including those living outside the U.S. to file yearly reports on their non-U.S. financial accounts to the Financial Crimes Enforcement Network (FINCEN).
With the Indian Government entering into the IGA, FATCA declaration has become a mandate for all investors, irrespective of the NRI or resident individual tag.
FATCA Declaration to be completed by August 31, 2016
The law holds that failure to effect the declaration on or before 31st August 2016 will lead to closure of the respective accounts – which could be interpreted as redemption of amount held in the concerned account or and closure of folio. This carries serious implications as around 25 lakh investors in India are yet to file their FATCA declaration, which means that industry assets that stand at around INR 50,000 Crores are at stake.
Defaulting accounts could get frozen
AMFI’s recommendation to SEBI, is to freeze the accounts associated with investors who are found to have defaulted in terms of FATCA compliance. It goes without saying that frozen folios would remain closed to fresh business. SEBI is expected to arrive at a final decision on effecting the same, after deliberations with other regulators in the Indian Financial sector, to achieve harmonized compliance across the Financial Services industry.
Whether interpreted as frozen or put up for redemption, investors and the industry in general, do not have much to be happy about the account closures. 25 lakh investors stand at crossroads as their accounts stand open to being frozen, owing to non-compliance with FATCA declaration. AMCs, on the other hand face the possibility of redemptions worth 1 lakh crore (approximately).
CAMS believes that by sensitizing the distributors and investors to the immensity of the need for FATCA declaration and by initiating pro-active measures to prompt them to act at the earliest, will help save a great deal of anxiety and rush towards the eleventh hour in guarding the accounts from closure.
With the deadline only six weeks away, CAMS has prudently initiated the emission of documents necessary for FATCA declaration, via its distributor mailback service which covers all investors associated with CAMS. Apart from this, CAMS has also extended pick-up services for registered MF investors.
CAMS has provided individual investors, who have furnished their mobile numbers/email-id at the time of investing, with online submission facilities of FATCA related information via the CAMS website; the process would be completed on authentication with a One Time Password (OTP) to be sent to the respective registered mobile number /email-id of the investor.
For those investors who had not furnished mobile numbers/email-id, a manual declaration form could be acquired from CAMS Website which needs to be printed, filled and submitted at any of the CAMS front-offices on or before 31 August 2016.
CAMS ushers investors, distributors and AMCs to act with diligence in meeting with FATCA requirements, at the earliest.
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