The Income Tax Department has said that all account holders of financial institutions should provide self-certification of compliance under Foreign Account Tax Compliance Act (FATCA) by April 30, 2017, without which their accounts will be blocked.
The Central Board of Direct Taxes in a release on Tuesday has said that in the event such self-certification is not provided by the end of April, the accounts will be blocked. Thus, the financial institution would prohibit the account holder from effecting any transaction with respect to such accounts.
However, the transactions by the account holder in such blocked accounts may, thereafter, be permitted once the self-certification is obtained and due diligence completed.
CBDT has said that financial institutions should make all efforts to obtain the self-certification.
The Inter-Governmental Agreement (IGA) with USA for implementation of FATCA entered into force on August 31, 2015. Under the alternative procedure provided in Rule 114H(8) of the Income-tax Rules, 1962, the financial institutions need to obtain self-certification and carry out due diligence in respect of all individual and entity accounts opened from July 1, 2014 to August 31, 2015.
Such self-certification and documentation was required to be obtained by the financial institutions by August 31, 2016, otherwise they were required to close the accounts and report the same if found to be a “reportable account” as per the prescribed due diligence procedure for preexisting account.
The CBDT has said that in view of the difficulties highlighted by stakeholders in following the provision for “closure” of financial accounts, it was informed on August 31, 2016 that the financial institutions may not close the accounts by August 31, 2016 in respect of which self-certifications have not been obtained under the alternative procedure and a revised time line shall be notified in due course.
The financial institutions were also advised to continue to work on completing the required due diligence, including obtaining self-certifications.
