Analyse the significance of recent agreement signed between the governments of India and the United States to implement the Foreign Account Tax Compliance Act (FATCA) for both the countries. (200 Words)

Foreign Accounts Tax Compliance act signed between US and India ushers in a new era of taxation cooperation between the two governments providing significant benefits to each country.
FATCA places in a mechanism for automatic and systematic exchange of tax related information of resident of USA in India and vice-versa to ensure undisclosed assets don’t remain untaxed.
For India,
  1. FATCA Will aid in its thrust to uncover Black Money stashed abroad
  2. Complement the Black Money Act-2015 by providing requisite Information to launch tax investigations
  3. Insulate Companies in India from 30% withholding tax that would have been levied by US Revenue Services in case of no intergovernmental FATCA
  4. It will serve as a broader model for more bilateral collaborations between different countries including the various tax havens.
  5. Economic significance— India-us agreement on FATCA will foster genuine investments contributing to positive growth. The tax compliance will bring legitimate revenues to both the countries that will benefit the fiscal situation of both the countries.
  6. Money-laundering—the tax evasion has important linkage with money laundering and illegal proceeds. Terrorism financing are now using sophisticated financial channels to find anti-state activities. Checking such proceeds by regulating tax information will bring both the countries closer in counter-terrorism efforts.
For USA, FATCA ensures bringing more tax evaders having offshore assets under the radars of tax investigation being conducted by it IRS ( Internal revenue Service) to enhance tax transparency and ensure an equitable tax regime. Hence FATCA brings good news for tax administration in both India and USA.



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