India, US agree to implement Foreign Accounts Tax Compliance Act

India and the United States have reached an agreement in substance on the terms of an inter-governmental agreement (IGA) to implement the Foreign Accounts Tax Compliance Act (FATCA) and India is now treated as having an IGA in effect from 11 April 2014.

However, the IGA would be signed only after cabinet approval, the Reserve Bank of India said in a release.

Indian financial institutions would have time up to 31 December 2014 to register with US authorities and obtain a Global Intermediary Identification Number (GIIN), RBI said.

''Indian financial institutions having overseas branches in Model 1 jurisdictions, including those jurisdictions where an agreement under Model I have been reached in substance would have time up to 31 December 2014 to register with US authorities and obtain a GIIN.''

Since IGA would be signed after obtaining the approval of the cabinet, such financial institutions having overseas branches in Model 1 jurisdictions should register only after the formal IGA is signed. RBI said this will be communicated in due course.

Overseas branches of Indian Financial Institutions in a jurisdiction having IGA 2 agreement or in a jurisdiction that does not have an IGA but permits financial institutions to register and agree to an FFI agreement, may register with US authorities and obtain a GIIN before 1 July 2014, to avoid potential withholding under FATCA, RBI pointed out.

"Overseas branches of Indian Financial Institutions in jurisdiction that does not have an IGA and does not permit financial institutions to register and agree to a foreign financial institution (FFI) agreement may not register and their overseas branches would eventually be subject to withholding under FATCA," RBI said.

The government has further advised that if registration of the parent bank / head office is a pre-requisite for a branch to register, such banks may register as per the time line indicated.