The Foreign Tax Compliance Act (FATCA) is an act enacted by the US Government to track its citizens' global income. It seeks to encourage greater accountability and transparency.
How does it affect Indian financial institutions?
To be considered as 'FATCA-compliant', Indian financial institutions will have to provide all relevant data pertaining to investments made by 'US Persons' in their various schemes to India’s Central Board of Direct Taxes (CBDT). The CBDT will then liaise with the Internal Revenue Service (IRS) of the United States.
Who conforms to the definition of a 'US Person'?
An individual account holder is treated as a US person if the account includes any of the following:
Lawful permanent resident (green card) status
A US birthplace
A US residence address or a US correspondence address including a US PO box
Standing instructions to transfer funds to an account maintained in the US or directions regularly received from a US address
An 'in care of' address or a 'hold mail address' that is the sole address with respect to the client or
A power of attorney or signatory authority granted to a person with a US address
Does it affect Indian Investors too?
No. The law is only applicable to US Citizens.
What does a US Citizen have to do, in order to claim compliance with FATCA?