Inter-Governmental Agreement (IGA) between US and India

Both US and India, signed an Inter-Governmental Agreement (IGA) to implement the Foreign Account Tax Compliance Act (FATCA) to promote transparency on tax matters.

Come September 30, 2015 India and the US will start sharing information about bank accounts or financial investments made by their citizens in each other's countries. This move will help curb offshore tax evasions.

"This will bring in greater transparency in tax administration and enforcing tax compliance as well as prevention of offshore tax evasion. This is a major step in the Government's resolve to fight the menace of black money," Revenue Secretary Shaktikanta Das said after signing the agreement on behalf of India. US Ambassador to India Richard Verma was another signatory.

The US enacted FATCA in 2010 to obtain information on accounts held by its taxpayers in other countries. It allows US financial institutions to withhold a portion of payments made to foreign financial institutions (FFIs) who do not agree to identify and report information on US account-holders.

Not only the Interest on the NRE account but also the interest from any other account such as NRO or any other income from anywhere in the world need to be report on the US Income tax return. You may able to claim the tax you paid in foreign county as foreign tax credit on US income tax return.

If you didn't report any income in the past, we would recommend to amend the tax return and pay the tax for the understated income ASAP.

If you have any questions or would like to schedule an appointment please feel free to contact us at 630-663-1500 or you can email us at tax@greatwaysinc.com.