Will block bank account if not self-certified: CBDT to FIs

New Delhi: The tax department today asked financial institutions (FIs) to get self-certification from account holders by April 30 to comply with FATCA provision and avoid blocking of accounts.

"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," the CBDT said in a statement.

The Central Board of Direct Taxes (CBDT) also advised all financial institutions that all efforts should be made by them to obtain self-certification. India had entered into an agreement with the United States for implementation of the Foreign Accounts Tax Compliance Act (FATCA) with effect from August 31, 2015.

Under the Income Tax Rules, the financial institutions had to obtain self-certification from account holders by August 31, 2016, in respect of all individual and entity accounts opened from July 1, 2014-August 31, 2015.

In view of the difficulties faced by stakeholders, the tax department had on August 31, 2016, indefinitely extended the deadline for complying with self-certification norms. In today's statement, the CBDT said queries were received from the financial institutions regarding the revised time lines for completion of due diligence.

It said if the account is blocked due to lack of self-certification, then the transactions by the account holder in such blocked accounts will be permitted once the self-certification is obtained and due diligence is completed.

Under the FATCA provisions, financial institutions are required to obtain self-certification and documentation or else 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. FATCA allows automatic exchange of financial information between India and the US.