Declare Tax Residency Status Soon: Banks to Overseas Account Holders
Indians with overseas bank accounts are receiving letters from banks, asking them to disclose their “tax residency status” before Dec.25 this year to offshore banks and financial institutions. The letters state that if the customers fail to declare their status, the banks with their overseas accounts would share whatever information they have with the Indian government, the Economic Times reported.
A letter from a British bank to an overseas Indian, cited by the Economic Times said: “If we don’t hear from you by the date (December 24, 2017) specified in the enclosed letter, we may be required to report you for tax purposes and accordingly we may be required to share your details to the appropriate tax authority.”
The bank would reportedly share the following details with the Indian government: account balance at the end of the calendar year, gross amount of interest, dividends, other income paid or credited to the account, as well as gross proceeds from sale or redemption paid or credited to the financial account.
Even Non-resident Indians, who opened their bank accounts by submitting their Indian addresses, apparently have to declare their status before the given date. Only Non-resident Indians who closed those accounts before Dec. 31, 2015 escape the purview of tax authorities. A person who has accounts with the same bank in different countries will have to inform the various offices of the bank.
The tax authorities in India, in the recent months, have issued notices to people for failure to disclose foreign bank accounts in tax returns, as non-reporting of it will attract penalty and even imprisonment.
This is part of the Common Reporting Standard (CRS) that over 90 countries, including India, UK, UAE, Singapore and Mauritius, follow. The CRS legislation mandates that banks, or financial institutions across the world are to give tax authorities access to a taxpayer’s account information.
“The bank may also contact an individual if it feels it has inadequate information to determine the person’s country of residence for tax purposes… Likewise, Indian tax authorities may also be compiling similar details of expatriates who are citizens or domicile of other countries but residing or working in India,” Mitil Chokshi, senior partner, Chokshi & Chokshi LLP. told the publication.