FATCA

Same as bank accounts and mutual funds, its not easy task for the Indian government to identify the property of NRIs and their earnings from them. There are many US based NRIs, who are planning to sell their property in India and for that they are ready to offer big discounts and the reason behind that is the implementation of FATCA (US Foreign Account Tax Compliance Act).

Recently, US and India have signed a new information sharing protocol which will bring the properties, assets, bank accounts, capital market investments and mutual funds under investments in India under the scan of US tax authorities. Now US if going to implement US Foreign Account Tax Compliance Act (FATCA), which aims to ensure that wealthy NRIs are paying tax on the income generated from overseas investments and properties. Due to FATCA, US have to share information about citizen’s assets in every other country. Now NRIs have to share details of their assets with US authorities.

According to BigDeals.in, a Gurgaon-based online property portal, “We have received several enquiries from NRI clients, which are from US in last two months. According to Ashwin Chawwla, CEO of BigDeals.in, “Some of these people are asking about more clarity on the issue as they are little confused about what’s happening and how they have to deal with this issue”. The more he added that while others are asking him to dispose their property in India in very short duration, and they are ready to offer big discounts, as law FATCA is not clear. It is well known fact that in past two decades many NRIs have invested in the real estate sector in India and now property market is on its peak, especially in the regions such as; Gurgaon and NCR. I bought a bungalow in Surat before three years ago for long term investment, but now am planning to sale it, as per the statement of Jignesh Shah, an engineer who works in Silicon Valley. Apart from that on the other side some of the US based NRIs are transferring their property to relatives instead of selling them.

According to one of the tax adviser, who help NRIs with property in India, “If property is first transferred and then sold, so the acquaintance or relative can emit back the money to the US citizen, as currently they are allowed to send $ 2,500,000 or Rs 16.6 crore per annum. And if the property is not transferred, so they can keep the cash in the separate account or tax paid on the amount received through the cheque. In present, there are two different schemes which are operational in US for NRIs with an aim to declare their wealth back home in India. First; there is no penalty for those, who will declare their liability, tax and income generated over the past three years from overseas properties. However; in other scheme; NRIs can pay tax of last eight years with interest and the penalty of 27.5 percent with an aim to compensate it.

According to one of the real estate experts, NRIs are not only selling their property in India, but at this point of time they are avoiding any kind of investment in India as this can lead them towards tax complications in the future. The more he added that Indian banks are reluctant to open accounts, which will help the US based NRIs to invest in India through different accounts because it can increase their reporting obligations.

FATCA

It seems that US passport will not be priced possession anymore for NRIs due to FATCA (Foreign Account Tax Compliance Act), which was signed up Indian government and US government. Some Indians are planning to surrender their hard-won green cards because now India and US are agreed to exchange financial information for the benefit of nation and keep an eye on big as well as small transactions. There are chances that now onwards US tax officials will impose the punitive levies on undisclosed property and cash in India. If you are the one who think that Indian tax authorities are a tenacious, so still they have to see the action of US Internal Revenue Service.

A well-recognized south Mumbai based socialite is planning to claim the citizenship of India as Indian government has signed up Foreign Account Tax Compliance Act (FATCA) with US government. However; other NRIs are shutting their old bank accounts with an aim to hide the big and small financial trails, gifting and assets in India to children¸ wives or husbands or other family members. From many years, US citizenship was the perfect way to hide savings and tax, while for other it was a point of vanity. Apart from that in many countries it’s not essential to get visa for US passport holders. As per tax expert, “One retired actor who was used to live in Mumbai, but to travel European Unions and other countries he took up US citizenship”.

All information exchange under FATCA includes bank accounts as well as all the assets and property transaction in real estate sector.  Apart from this information it could also involved crime records. Till now only few Indians who were US citizen were used to reveal their Indian income and investments in the US and vice versa, however; now if those information will be shared by the India in the US or US in India, so it will attract a lot of penalty with other punitive action and this is led many NRIs to move back in India to avoid penalty, as per the statement of Lloyd Pinto, Director, Grant Thornton India. Celebrities as well as businessmen are looking for ways out of the imbroglio. A large number of people residing in India and they have green card or they were retaining their American passports, but now due to FATCA, they are planning to declare all their assets in US or India, as per the statement of Jeenendra Bhandari, Partner at Tax and Audit Firm and Co LLP, who is advising clients on the matter.

Solution for FATCA Issue:

According to Bhandari, A Chartered Accountant who have license to practice in US as a certified public accountant, All NRIs has three options; they can declare their property if they have missed the deadline for this, so they can pay the penalties or they can also restructure their holdings. But for third option they have to take up Indian citizenship and renounce the American one. Those who are opting for the last one are mostly those who have took US citizenship to save tax in India, but there are many NRIs for whom its tuff and complex to transfer their assets. Because there are a lot of complications in property transferring procedure no matter you are transferring your property to your wife, son, or other family members. Transferring assets is not the most favored route because it put the owners at the mercy of relatives, as per the statement of tax experts.

However; if you are looking for the opportunity to switch the passport, so its not an easy task because according to US law, those who will renounce their citizenship have to get clearance from the revenue authorities. Most of the experts are asking their NRI clients to declare their assets because according to US tax law penalties could exceed 100 per cent. There are many NRIs who are closing their bank accounts to become Indian citizens while opening new accounts, so if you are going to US for two or more years, so you may have to face tough and complex procedure from concern authorities.