Under FATCA provision (Foreign Account Tax Compliance Act), Income Tax Department has asked all banks and financial institutions to seek self-certification from bank account holders, before April 30th.
Failure to do so will lead to blocking of all such bank accounts, which are not self-certified. This diktat has issued for only those bank accounts, which were opened between July 2014 & Aug 2015.
However, it is not yet clear whether linking of Aadhaar is also mandatory for these bank accounts or not.
In a statement, Central Board of Direct Taxes (CBDT) said, “The account holders may be informed that in case self-certifications are not provided till April 30, 2017, the accounts would be blocked, which would mean that the financial institution would prohibit the account holder from effecting any transaction with respect to such accounts..”
The official Twitter handle of Income Tax Dept. also tweeted this information.
As per the directive, the bank accounts would be de-blocked, once the required self-certification is done.
As per available information, self-certification can be done using any eKYC method, which also includes Aadhaar. However, it is not yet clear whether Aadhaar should be the only form of eKYC for these bank account holders or not.
The confusion becomes bigger since Govt. has already made Aadhaar mandatory to be linked with every PAN Card and for IT Filings. Besides, since last year, UIDAI and Govt. of India have been asking banks to link every bank account with their Aadhaar card details.
What Is FATCA And Why Self-Certification Is Necessary?
Governments of India and USA had entered into an agreement to implement Foreign Accounts Tax Compliance Act (FATCA), which came into effective from August 31, 2015.
FATCA basically allows a seamless and hassle-free exchange of information between India and USA, regarding financial details of their common citizens. And, is mainly meant for those NRIs, who stay in US and invest in Indian companies. The objective to FATCA was to make sure that such investors are paying the taxes from wealth generated via overseas investments in India and other countries.
Under this agreement, investors are mandated to furnish details related to tax residence, Tax identification number, country of birth, citizenship and more.
As per a report by ET, all bank account holders who have opened their accounts between July 2014 & Aug 2015 have been asked to link their respective Aadhaar card details with the bank accounts.
However, notification from IT and CBDT doesn’t mention the requirement of Aadhaar as eKYC for self-certification.
We will keep you updated as we receive more information.