As part of FATCA compliance, the Central Board of Direct Taxes (CBDT) has asked the banks/financial institutions to obtain self-certification from customers by April 30, 2017, to avoid closure of accounts.
It is clearly directed the banks to obtain a self-certification for the accounts opened between July 1, 2014 to August 31, 2015.
In a series of tweets, the income tax department said,”account holders are informed that in case self-certifications are not provided till April 30, 2017, accounts would be blocked.”
It further added that the transactions by the account holder in such blocked accounts may, thereafter, be permitted once the self-certification is obtained and due diligence completed.
So what does it mean for you? For this we need to understand what is Foreign Account Tax Compliance Act (FATCA) compliance.
Last year, India signed Inter-Governmental Agreement (IGA) with the US for automated exchange of information between the two countries. This initiative is for improving the International Tax Compliance and implementing the FATCA.
Under this agreement, every Indian investor needs to provide an additional KYC and compliance form, apart from the regular KYC information, at the time of operating any financial or investment account.
This also means that if you have a demat account or just opened a new one then making fresh purchases of mutual fund units or other investments like fixed deposits would now need a self-certification for these accounts.