FATCA and CRS

Both regimes answer the same question from two directions: where is this investor actually taxable?

FATCA is a United States law aimed at tax evasion by US persons holding accounts offshore. It raises the due-diligence and information-reporting bar for both individual and entity accounts. On 9 July 2015 India signed an Inter-Governmental Agreement with the USA, so Indian financial institutions supply the information to Indian tax authorities, which then transmit it to the USA automatically.

CRS — the Common Reporting Standard on Automatic Exchange of Information — was developed by the G20 and the OECD and generalises the same idea to everybody. Financial institutions in the "source" jurisdiction collect and report information on account holders resident in other countries, and that information is transmitted automatically, annually.

In India the nodal agency for both is the Central Board of Direct Taxes (CBDT).

The declaration is a mandatory field on the mutual fund application form, alongside PAN, bank details and the nomination. Investors — including guardians — whose country of birth, citizenship, nationality or tax residency is other than India must furnish:

• place or city of birth, country of birth, country of citizenship or nationality;
• whether tax residency, country of birth, citizenship or nationality is other than India (yes or no);
• if yes, every country in which the investor is resident for tax purposes and the associated Tax ID number.

Investors must also inform the fund house whenever their status changes — this is a continuing obligation, not a one-time tick.

The RTA's own workflow runs downstream of that. It identifies reportable accounts, reports them to the AMC in uploadable format on the CBDT reporting portal, and flags non-compliant investor folios. Where the CBDT raises a Data Quality Report (DQR), the AMC downloads it and shares it with the RTA, which reviews it and supports the AMC in filing revised statements.

Since 1 July 2024, SEBI requires intermediaries that are Reporting Financial Institutions to upload the FATCA and CRS certifications obtained from clients onto the KRA systems; certifications obtained before that date had to be uploaded within 90 days of 1 July 2024.

Mr Varma, an Indian citizen, moves to Dubai for work and becomes tax resident in the UAE. He holds Rs 48,40,000 across three folios with one fund house.

He files an updated FATCA/CRS declaration: country of birth India, country of tax residency UAE, with his UAE Tax Registration Number. The RTA re-flags his folios as CRS reportable, and from that year his account information travels to the CBDT, which passes it to the UAE authorities under AEOI. Nothing is deducted; the fund simply stops pretending he is taxed where he is not.

Three things change in the same folio at the same time, and the exam likes all three:

So a Rs 1,20,000 IDCW declared on his folio yields Rs 96,000 in his hands after 20% TDS, where as a resident it would have been Rs 1,08,000 after 10%.

Separately, and for a different reason: because he put Rs 22,00,000 into schemes of this fund house during one financial year, the trustee must also report it to the Income Tax authority under the Statement of Financial Transactions — the threshold is Rs 10 lakh or more in a financial year for acquiring units, excluding transfers from one scheme to another of the same mutual fund. Two reports, two regimes, one folio.

Chapter 11 (Operational Concepts of Mutual Funds) carries FATCA, CRS and the SFT under "Reporting Requirements to CBDT" and gives the RTA's role in each; Chapter 12 (Investors in Mutual Funds) lists exactly what the investor must declare. Expect factual questions — FATCA is a US law, the IGA is dated 9 July 2015, CRS comes from the G20 and OECD, CBDT is the nodal agency — and a question on what a non-resident investor must additionally furnish. The 20 percent NRI TDS on dividend and the Rs 10 lakh SFT threshold are both in the same chapter.

• FATCA is a United States law; CRS is a G20/OECD standard. Neither is an Indian statute, though both are implemented here through the CBDT.
• The declaration is compulsory for every investor, not only foreign ones. A resident answers "no" — leaving the field blank makes the application incomplete.
• Guardians are covered too. A minor's folio picks up the guardian's country of birth and tax residency.
• It is a continuing obligation. The investor must tell the fund house when his status changes; a declaration made at onboarding does not stay true.
• CBDT is the nodal agency, not SEBI and not the RTA. The RTA prepares and uploads; it does not exchange information with foreign governments.
• A Data Quality Report is not a penalty — it is the CBDT asking for a corrected filing, which the RTA helps the AMC submit.
• Do not merge FATCA/CRS with the SFT. The SFT is a domestic Income Tax Act section 285BA report triggered by Rs 10 lakh or more of unit purchases in a financial year, excluding inter-scheme transfers within the same mutual fund.