Have you opened a new folio with any Mutual Fund between 1 Jul, 2014 & 31 Aug, 2015?
If yes, then you are required to provide FATCA self-certification about your tax residency by 30th April 2017, without which your folio would have to be blocked by the concerned Mutual Fund as per government directive, and you will not be allowed to effect any transaction with respect to such accounts until you provide the self-certification.
“FATCA” or Foreign Account Tax Compliance Act is a United States (US) law aimed at prevention of tax evasion by US citizens and residents (“US Persons”) through use of offshore accounts.
The Inter-Governmental Agreement (IGA) signed between the US & Indian Governments for implementation of FATCA came into force on 31st August 2015. As per FATCA provisions, there are different rules for “pre-existing” and new accounts.
Under the alternative procedure provided in Rule 114H(8) of the Income Tax Rules, 1962, the financial institutions need to obtain self-certification and carry out due diligence in respect of all “New accounts” – whether in respect of an individual or an entity - opened from 1st July 2014 to 31st August 2015.
Such self-certification and documentation was required to be obtained by the financial institutions by 31st August 2016, failing which 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 pre-existing account.
On view of the difficulties highlighted by stakeholders in following the provision for "closure" of financial accounts, Government of India had extended the deadline of August 31, 2016 for obtaining the self-certifications till further notice.
On April 11, 2017, the Ministry of Finance, Government of India has issued a press release stating that in case the self-certifications are not provided by the account holders by April 30, 2017, the accounts should be blocked and that the financial institution should prohibit the account holder from effecting any transaction with respect to such accounts. It is further stipulated 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.
Thus, if you have opened a new account / folio with any Mutual Fund between 1st July 2014 and 31st August 2015 (i.e., with whom you had not invested prior to 1stJuly 2014), you need to provide a self-certification about your tax residency to the respective Mutual Funds for compliance with FATCA, failing which the account/s shall be blocked and you will not be allowed to effect any transaction in respect to such accounts, until you submit the self-certification to the concerned mutual fund.
Mutual Funds have been making sustained efforts to collect the FATCA self-certification from the investors who have opened new accounts / folios during the aforesaid period to confirm their tax residency. However, there are still a large number of investors who are yet to provide the same.
If you have opened new account with any Mutual Fund between 1st July 2014 and 31st August 2015 and have not yet submitted your FATCA self-certification form, it is in your interest to provide the self-certification to the respective Mutual Funds without any further delay.
You may also submit the same on-line through the respective Mutual Fund Registrars as per the links provided below: