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The
agreement aims to close a window for U.S. citizens to avoid tax
through financial products like equities, bank accounts and
insurance.
In return, New Delhi expects to garner Washington's support to
bring back illicit funds stashed by Indians in foreign tax
havens and boost revenues by getting information about Indians
working in the United States.
The agreement "would enhance tax transparency and eventually
bring in higher equity into the direct tax regime which are
necessary for a healthy economy," India's revenue secretary
Shaktikanta Das said at the signing in New Delhi.
Following his election promise, Prime Minister Narendra Modi has
enacted a 'black money' law that foresees tough penalties and a
jail term for tax evaders who fail to declare their overseas
incomes.
Washington has signed pacts covering more than 80 tax
jurisdictions to implement the Foreign Account Tax Compliance
Act, or FATCA, requiring financial institutions to share
information about Americans' accounts worth more than $50,000.
Last year, Modi joined leaders from the Group of 20 countries in
Australia in an agreement for countries to automatically
exchange tax information on a reciprocal basis by the end of
2018.
Under the pact, banks, mutual funds, insurance, pension and
stock-broking firms will report their American client details to
the tax department for sharing with the United States, said an
Indian finance ministry official.
Investors will have to provide correct information about their
tax residency and financial assets that would be shared with the
U.S. tax authorities, he said, requesting anonymity because he
was not authorized to speak on the record.
To date, the United States has intergovernmental agreements with
more than 110 jurisdictions and is engaged in related
discussions with many other jurisdictions, the statement said.
(Reporting by Manoj Kumar; Writing by Malini Menon; Editing by
Douglas Busvine)
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