The Income Tax department made a shocking announcement which may annoy many who has gone through the difficulties during demonetisation process. In an announcement IT Department has stated that Aadhaar number and self-certification a mandatory for accounts opened from July 2014 to August 2015. According to the notification, account holders will have to submit there Know Your Customer (KYC) details and Aadhaar number to banks and financial institutions by April 30 and self-certify them to comply with Foreign Tax Compliance Act or FATCA.
The department also asked the financial institutions to inform the customers about the consequences if they fail to submit the details. It 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.”
It however clarified that the transactions by the account holder in such blocked accounts may be permitted once the self-certification is obtained and due attentiveness.
FATCA’s main purpose is to ensure account holders do not evade tax on income generated on wealth lying abroad. In July 2015, India and the US signed a tax information sharing agreement under a new US law, FATCA, aimed at bolstering efforts for automatic exchange of financial information between the two nations about tax evaders.
The account holder will have to provide all details of transactions that were undertaken outside India besides updating the Know-Your-Customer (KYC) data, income tax department officials said.
The department said in a circular that financial institutions must make all efforts to obtain the self-certification. This is applicable for all individual and entity accounts opened between July 2014 and August 2015. The account holders may be informed that, in case self-certifications are not provided till 30 April 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.
Alleging the harassment to the common man, Vedant Sharma, a Freelance content writer said AV, “This government is harassing the common man in the name of financial stringency. They should catch big fishes which are roaming freely and looting others. Government is harassing meagre earners who are forced to live in such conditions. And despite of these big dramas, there is nothing for youth and common man by this government. This government has reduced jobs, scholarships, fellowships, stopped funding to important departments like education and research. On Scientific research, government even does not spend 0.8%, and for such department they don’t have funds and denied financial help to them. Only God knows what they are doing with the money.”
The new rule comes in the wake of an Inter-Governmental Agreement (IGA) with the United States for implementation of Foreign Account Tax Compliance Act (FATCA) implemented by India from August 31, 2015. Though, the IT department says, “Under the alternative procedure provided in Rule 114H(8) of the Income-tax Rules, 1962, financial institutions need to obtain self-certification and carry out due diligence in respect of all individual and entity accounts opened between July 2014 and August 2015.
Navin Kumar, a banker said, “Day after day, government is amending and giving new rules. Many citizens have not made their Aadhaar card due to required papers. One will not produce 10 proofs for each rupee he earned and 20 proofs for each paise of tax paid on that earned money.
Such self-certification and documentation were required to be obtained by the financial institutions by August 31, 2017, 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 a pre-existing account.
The financial institutions were also advised to continue to work on completing the required due diligence, including obtaining self-certifications.