Those who have opened their accounts in between July 2014 to August 2015, they will have to submit their Know Your Customer (KYC) details and their Aadhaar number to your banks and Financial Institutions by April 30 and the account holders need to self-certify them to comply with FATCA regulations (Foreign Account Tax Compliance Act).
In case the account holders are unable to furnish their details and provide self-certification by the new deadline, banks and financial institutions have the option of blocking the accounts.
Once the account holders furnish their details Financial Institutions and Banks can operate the accounts. The provisions apply to accounts which come under the ambit of FATCA regulations.
Why should you link your bank account with Aadhaar?
Banks and Financial Institutions were asked to obtain self-certification and carry out due diligence for all individuals and entity who opened their accounts from July 1, 2014 to August 31, 2015 to comply with the Foreign Account Tax Compliance Act (FATCA) pact signed by India and the United States.
In July 2015, India and US signed a tax information sharing agreement under a new US law, FATCA aimed at for automatic exchange of financial information between the two nations about tax evaders.
What will happen if your bank account does not link with Aadhaar?
The account holders will be informed that in case self-certifications are not provided till April 30, 2017, otherwise, accounts would be blocked, which would mean that the financial institution would prohibit the account holder from effecting any transaction with respect to such account.
What is FATCA?
FATCA promotes cross-border tax compliance by implementing an international tax standard for the automatic exchange of information related to US taxpayers. FATCA regulations require tax authorities to obtain detailed account information for US taxpayers on annual basis.
Why has FATCA pact been signed?
FATCA is intended to increase transparency for the Internal Revenue Service (IRS) with respect to US persons that may be investing and earning income through non-US institutions. The primary goal of this pact is to gain information about US persons.