The Foreign Account Tax Compliance Act (FATCA) is a 2010 United States federal law to enforce the requirement for United States persons including those living outside the U.S. to file yearly reports on their non-U.S. financial accounts to the Financial Crimes Enforcement Network (FINCEN).
Its aim is to prevent U.S. taxpayers from using accounts held outside of the U.S. to evade taxes.
It requires U.S. financial institutions to withhold a portion of payments made to foreign financial institutions (FFIs) who do not agree to identify and report information on U.S. account holders.
An Inter-Governmental Agreement between India and USA was signed for implementation of Foreign Account Tax Compliance Act (FATCA).
The Inter-Governmental Agreement (IGA) with USA for implementation of FATCA entered into force on 31st August, 2015.
The Government of India has also joined the Multilateral Competent Authority Agreement (MCAA) for Automatic Exchange of Information as per Common Reporting Standard (CRS).
FATCA promotes cross border tax compliance by implementing an international standard for the automatic exchange of information related to US taxpayers.
FATCA regulations require tax authorities obtain detailed account information for US taxpayers on an annual basis.