FATCA impact on NRIs property in India

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FATCA Impact On NRIs Property In India
Mar 2018
In Green Homes
The United States Foreign Accounts Tax Compliance
Act is prompting numerous NRIs to sell off their
property in India. Such extreme reactions,
however, are viewed as premature by the experts.
Thus, it is understandable that there is
confusion in regards to the impact of the Foreign
Account Tax Compliance Act (FATCA) on the
non-resident Indian's property. Numerous
non-resident Indians are not sure about what
exactly does the reporting needs are. Some of
these may not have a clearer understanding of
what exactly is FATCA? There are many such
questions in mind such as must US NRIs report the
Indian property under Foreign Accounts Tax
Compliance Act? What are the reporting
requirements? How can one avoid the double
taxation on the investments? In order to put all
the frequent questions to rest, here is some
carefully gathered information you need regarding
FATCA and hoe will it affect the NRI property in
India.
What is FATCA?
It is an abbreviation for Foreign Accounts Tax
Compliance Act which is issued by the government
of the United States. The US legislation majorly
focuses on preventing the tax evasion by the US
taxpayers. Numerous people have attempted to
evade the taxes by making use of the non-US
financial instruments, offshore investments and
Foreign Accounts Tax Compliance Act is an attempt
to curb this practice. This was the primarily
implemented in 2014. Since then, it was slated to
be implemented in the financial institutions in
the gradual timeline. Numerous non-resident
Indians have been selling property in India
fearing that they might be questioned on the
purchase and because penalties and taxes might be
levied on them. Which kind of assets is subject
to the FATCA reporting under from 8938? Under the
Foreign Accounts Tax Compliance Act, certain
foreign assets have been reported in the form of
8938. The form is called statement of Specified
Foreign Financial Assets'. The assets required to
report include- All the financial accounts
with the Foreign Financial Institutions be it the
deposit or the custodial account. All
foreign hedge funds, mutual funds and
partnerships interests held by you in any country
other than the United States All the
policies of the life insurance issued overseas by
you, including annuity contracts All the
securities and the stocks owned by you which are
separate from the bank account or any other
financial accounts Which are the Assets not
subject to the FATCA reporting? There are some
assets that are not subject to the FATCA
reporting under the Form 8938. These include-
The foreign currency held y you, provided that
the currency is not held in any of the financial
institutions. Form 8938, however, needs to
declare all the foreign currency if it is held in
the financial institution. Safety deposit
boxes that are held by you in the foreign
financial institutions not to be reported as
these are not considered assets of the
foreign finances. Various assets such as
antiques, jewelry, art pieces, cars and various
other collectibles aren't required to be reported
under FATCA. This is due to the assets which are
not considered foreign financial assets as of now.
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What is the effect of FATCA on the properties
held in India by US NRIs?
Good news for green card holders and NRIs Living
in the US is that FATCA cant and will not
supersede Double Tax Avoidance Agreement. The
treaty signed by USA and India in order to avoid
the double taxation should basically protect from
having to pay the double taxes on the assets.
According to the provisions of the agreement,
following rules will still have a hold- NRIs
or the green card holders who earn incomes on the
immovable property in the US will be taxed by US
government for the same, completely based on the
US rules and regulations. Non-resident
Indians ear income on the immovable property in
India which will be taxed for same in India
provided that income that is earned is above the
minimum slab of tax. Since the income from
property earned in India is not subject to
taxation in the US, this certainly should not
cause for worry for the non-resident India's
holding property in India. Should the income from
property in India be reported? Even if you aren't
being taxed for income form the Indian immovable
property in the US, you should still declare the
income while filing for the tax returns. In case,
one has paid the taxes twice for the similar
income, there are provisions within the DTAA to
ensure that receive tax breaks or tax credits for
double taxation.
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