Source: Telegraph India
India and some other countries have got one more month from the US to sign the Foreign Account Tax Compliance Act (Fatca), an agreement which seeks to facilitate the flow of financial information.
The initial deadline set by the US for signing the Fatca was December 31.
“The finance ministry will seek the Cabinet’s approval before going ahead and signing the Fatca,” Das added.
Under Fatca, the US government will sign an inter-governmental agreement (IGA) for sharing of information with various countries, including India, where American individuals and companies have accounts and other assets.
The non-compliance with Fatca will include 30 per cent withholding tax on US source payments.
Under the pact, the exchange of information between the countries will be subject to a confidentiality clause.
The US treasury had released two formats of the IGA Model 1 and Model 2. In Model 2, financial institutions will report information directly to the US IRS (Internal Revenue Service) rather than their local jurisdictions.
Recently, referring to Fatca, finance minister Arun Jaitley had said the Reserve Bank had cautioned the government of serious consequences in case India fails to comply with the American legislation.
“The consequences of not signing the agreement with the US under Fatca will be disastrous. It will negate the efforts being undertaken by our government to revive the Indian economy,” he had said.
The revenue secretary also said the government was making all efforts to achieve the current fiscal’s revenue collection target.
“We are making all efforts to achieve the 2014-15 revenue tax collection target. We are holding regular review meetings with tax officers. Direct tax collections are looking up in December,” Das said.
The revenue collection target for direct taxes – levied on personal and corporate incomes – for financial year 2014-15 was fixed at Rs 7,36,221 crore in the budget.