FATCA_CRS Compliance – Invalid TIN

As a part of Budget proposals, Government of India proposes to introduce a deemed provision that every Indian Citizen who is not liable to tax in any other country, by virtue of his/her domicile or residence, shall be deemed as a resident of India and consequently, his/her global income would be taxable in India.

At present, various NRIs and PIOs visiting India for their business or personal reasons and staying in India for a period less than 182 days are maintaining their non-resident status.

It has been proposed to revise the limit to 120 days from existing 182 days to bring PIOs and NRIs under Indian Tax net.

The above measures have cast upon the Banks and other Financial Institutions the responsibility of obtaining/capturing, the tax residency status/country, in their books correctly.

Moreover, Central Board for Direct Taxes (CBDT) has commenced the process of sharing the details of CRS reportable accounts with partner countries. As of a recent date, around 110 countries have committed to exchange information on account holders. CBDT shares the details of reportable accounts with these countries. Out of these 110 countries, around 90 countries have given the TIN structures or declared that there is no income tax in their jurisdiction.

As regards the countries which have shared TIN structure/functional equivalent with OECD, upon receipt of account details from CBDT, the details are cross checked by these countries’ nodal authorities, based on TIN details provided in FATCA_CRS_61B data. Wherever the details are incomplete or incorrect, CBDT has started to revert to the Reporting Financial Institutions (RFIs) directing them to resubmit the account details with correct TIN.

To ensure the accuracy of TIN, Banks may have to incorporate suitable Rule Engine in their Core Banking System to validate the TIN Structures of various countries or build such validation process outside CBS at the time of on-boarding new customers and at the time of obtaining Self_Certification from the existing customers. This will help the Banks and Financial Institutions to validate the TIN details, while data processing under FATCA_CRS Compliance, take up with customers to get correct TIN, wherever invalid, thus avoiding such resubmission of data to CBDT in future.