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Have You Complied With FATCA To Invest In Mutual Funds? - Outside View by PersonalFN

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Have You Complied With FATCA To Invest In Mutual Funds?
May 2, 2017

From May 1, 2017, your mutual fund investments might be frozen for the non-compliance with investment guidelines.

The Government recently announced that investors who have not submitted self-declarations as required under FATCA, on or before April 30, 2017 for their investments made between July 1, 2014 and August 31, 2015, won't be able to transact from May 01, 2017.

To be precise, the Central Board of Direct Taxes (CBDT) issued a press release addressing financial institutions in India. According to which, "The financial institutions are advised that all efforts should be made by the financial institutions to obtain the self-certification. The account holders may be informed that, in case self-certifications are not provided till 30 April 2017, the accounts would be blocked, which would mean that the financial institution would prohibit the account holder from effecting any transaction with respect to such accounts. The transactions by the account holder in such blocked accounts may, thereafter, be permitted once the self-certification is obtained and due diligence completed."

The last line is important. Since the blockade is only temporary and will be lifted soon after the submission of self-declaration. This is probably why mutual fund houses are not worried. For those who are not aware of FATCA (Foreign Account Tax Compliance Act) here's a quick update.

What's FATCA?

Money laundering and terror funding are the biggest problems that almost all major economies of the world face today. The world's largest economy-the US is also not an exception to this. The US Government signed various treaties with other nations to step up vigilance and increase transparency in tax matters at a global stage. Nearly 100 countries have signed agreements with the US including India.

You might ask why you will have to comply...

Simply because, Indian Government has agreed to collect financial declarations from all investors about their investments in the US, and then share the information with the US authorities. Financial institutions that are expected to obtain FATCA declaration from their clients include banks, mutual funds, insurance companies, and stock brokers.

What should you do in case you haven't submitted a self-declaration?

Needless to say, you should submit your declarations as soon as you can. You have two options-either to contact their brokers or use the online facility provided by the registrars and transfer agents.

Compliance is an indispensable part of any legit investment. Therefore, you shouldn't feel annoyed even though you might occasionally be inconvenienced because of it. To save time, take advantage of the online facility wherever you can.

Stay focussed on investing in avenues that suit your investment objectives and are in line with your risk appetite and financial goals.

PersonalFN offers unbiased mutual fund research services. If you are a long-term investor, you might be delighted to know more about its latest offering: Strategic Portfolio for 2025, which is designed exclusively for smart and visionary investors like you.

PersonalFN is a Mumbai based personal finance firm offering Financial Planning and Mutual Fund Research services.


The views mentioned above are of the author only. Data and charts, if used, in the article have been sourced from available information and have not been authenticated by any statutory authority. The author and Equitymaster do not claim it to be accurate nor accept any responsibility for the same. The views constitute only the opinions and do not constitute any guidelines or recommendation on any course of action to be followed by the reader. Please read the detailed Terms of Use of the web site.

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Jul 20, 2018 12:33 PM