MUMBAI: The RBI has said India and the U.S. have agreed to implement a foreign tax compliance law and asked banks and financial institutions to register by this year-end to report accounts and assets held by U.S. citizens.

India and the U.S. have agreed to implement Foreign Accounts Tax Compliance Act (FATCA), a US law that targets tax non-compliance by U.S. taxpayers with foreign accounts. The Inter-Governmental Agreement (IGA) on FATCA, which came into effect on April 11, will be signed only after Cabinet approval.

"Indian Financial Institutions would have time up to December 31, 2014, to register with US authorities and obtain a Global Intermediary Identification Number (GIIN)," the RBI said in a notification.

FATCA mandates reporting by US taxpayers about certain financial accounts and offshore assets and reporting by foreign financial institutions about accounts held by US taxpayers or foreign entities in which U.S. taxpayers hold a substantial ownership interest.

Indian financial institutions with overseas branches have time until December 31 to register. However, they should register for GIIN only when the formal IGA is signed after cabinet approval, the RBI added, saying this would be communicated to them.

Financial entities with overseas branches in a jurisdiction that does not have IGA but allows them to register as foreign financial institutions (FFI) should do so with the US authorities before July 1, 2014, to avoid potential withholding under FATCA.

Overseas branches in a jurisdiction that does not have IGA and does not allow an FFI agreement may not register and they would eventually be subject to withholding under FATCA, it said.

The RBI said if registration of the parent bank or head office is a pre-requisite for a branch to register, such banks should do so as per the given time frame.