Savings schemes are an effective way for citizens to plan for their retirement and other future goals. When such schemes are backed by the government, they provide an added advantage of the safety of corpus as well as assured returns. Therefore such schemes are preferred by investors and are usually included to be part of the investment portfolio. NPS is a widely popular scheme that not only provides such benefits but also additional tax deductions. However, NPS has an additional requirement to be FATCA compliant that is specific for the NRI investors. Given below are further details of such compliance and the relevant details of the same.
What is NPS?
There are various savings schemes initiated by the government from time to time for the benefit of the investors. NPS (National Pension Scheme) is one such scheme focusing on retirement benefits for the citizens of the country. Under this scheme, investors are allowed to withdraw 60% of their corpus at the age of 60 years or 70 years at their discretion and the balance will be saved in approved annuities. The uniqueness of this scheme is that the benefit of this scheme is also available to the NRIs.
What is FATCA?
The origin of FATCA (Foreign Account Tax Compliance Act) was in the US to avoid any cases of double taxation for the NRIs and also to curb the cases of tax evasion. The purpose of FATCA was to encourage better compliance with tax laws between two countries. Under FATCA, all financial institutions, mutual funds, etc. that disburse any income to the NRIs living in the US to provide the details of the same.
What is the need to self-certify?
The Indian Government approved the FATCA laws in 2015 and accordingly any NPS account opened by an NRI on or after July 1st, 2014 needs to be FATCA compliant. This compliance has to be self-certified by providing Form 61B under the Income Tax Act, 1961. This form has to be provided by the NRIs to Indian financial institutions or savings schemes like NPS. The form will then be verified for correctness and after due diligence, the self-declaration or the self-certification will be authenticated.
What are the effects of default in self-certification?
The provisions of FATCA compliance relating to NPS required the NRIs to submit the self-declaration by the 30th of April 2017. If the NRI has failed to provide the necessary self-certification, their NPS account would be frozen or blocked. Investors of such accounts will not be permitted to access them or carry out any transactions till the time the self-certification is not obtained. The same will be released once the required self-certification is duly submitted to the relevant authorities.
How to make NPS accounts FATCA compliant?
The process to make the NPS account FATCA compliant can be done through the online or offline process. The details of the same are highlighted below.
- Offline process
The offline process of submitting the self-certification for FATCA requires the investors to physically submit the self-declaration form. Such a form has to be submitted in case the citizenship, or birthplace of the individual is outside India or if the residence of the person is outside India. The link for downloading such a form is
https://npscra.nsdl.co.in/download/pdf/FATCA%20Self%20Declaration%20Format.pdf
The details that are to be filled on the self-certification form include
- Filing the basic details like name, PAN number, PRAN number, and date of birth.
- Part I requires details like the country of birth, citizenship, residence details for tax purposes, and whether or not the person is a US citizen.
- Under Part II, the details to be filled are the TIN (Tax Identification Number) of the country issuing the same.
- Part III is the declaration that has to be signed by every person (along with providing their name and date of signing the declaration) whether they are residents of India or otherwise. This declaration certifies that the details provided are accurate and correct to the best of their knowledge.
- Part IV is the self-certification that has to be signed only if the country to be listed in part I is not India and the TIN or its equivalent is not available. The other case when part IV of this declaration has to be signed if the US person has provided a Yes in part I and TIN are not available. In such cases. The person has to provide relevant details like,
- Confirmation that the person is not a US citizen and not a resident of any other country for tax purposes other than India. Such a declaration has to be duly signed as well.
- The document proofs that can be submitted to support this claim are Passport, Election ID card, Driving Licence, UIDAI letter, PAN Card, NREGA Job Card, and Government Issued ID Card.
- This form has to be submitted to the Central Record-keeping Agency (CRA) at the following address.
- Online process
The online process to submit the self-certification for FATCA compliance is given below.
- Visit the NSDL website at the following link https://www.cra-nsdl.com/CRA/
- The next step is to click on ‘FATCA Compliance’ from the available options.
- The users will be redirected to the self-certification tab. Users will have to enter their PRAN and click on ‘Submit’.
- The FATCA self-certification form has to be completed by providing all the necessary details like name, PAN number, residence, nationality, birthplace, and income. If the user is a resident of any other country, the TIN details or its equivalent have to be provided too. After providing all the relevant details, they will have to click on ‘submit’.
- The self-declaration has t one duly signed and authorized by checking the available box.
- The user will be sent an OTP on their NPS registered mobile number for confirmation which has to be submitted to complete the FATCA self-certification through online mode.
- Users will receive an acknowledgment number for successfully completing the self-certification which has to be saved for future reference.
Conclusion
FATCA compliance is a way to ensure tax is not evaded on any income by investors through the mere error of non-declaration. The self-certification form is easy to fill and submit ensuring end-to-end compliance without any hassles.
FAQs
Yes. Users can check the status of their FATCA compliance by clicking on the following link and providing their PRAN and entering the captcha code displayed on the screen.
Yes, FATCA details have to be mandatorily submitted by NPS subscribers who have their birthplace, citizenship, and residence for tax purposes outside India or in the US.
Yes. FATCA self-certification is to be provided by mutual fund subscribers too.
If a person fails to provide FATCA self-certification, their NPS account will be blocked and they will not be able to contribute to their NPS account or withdraw from the same using their PRAN.
