FATCA: A global tax system

America’s new double tax agreement with India would mean that under FATCA, America can track data of asset of their citizens. These assets will not be only those that are in America but their original motherland. Also Indian financial institutions will be compelled to sign this agreement, if not, face high tax with their business on American soil.

"With FATCA, the flow of information will be far more as Indian financial institutions will have to compulsorily share data on U.S. residents' financial assets in India. I believe India will have to sign the intergovernmental agreement for FATCA, failing which Indian institutions could be subjected to a higher tax in the U.S.," said Daksha Baxi, executive director at the law firm Khaitan & Co said to Economic Times.

Financial firms are of the view that, should the global tax scrutiny by America intensify then the amount of investment made by Diasporas will dip in the country. Here is a little insight on the tax structure for NRI assets in America. Dividends from a foreign company vary between 20 and 39.6 percent. Long-term Capital gains tax is at 20 percent with no difference in list and unlisted stock. Estate duty is at 40 percent. Gifts beyond $14,000 are viable for tax at 40 percent.

There are ways to carefully plan tax evasion by following the law but it will require smart planning. No matter what the situation be accountant firms have said that this is not illegal. FATCA gives India every right to look into the assets of its citizens in America and vice versa.

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