FATCA & CRS Compliance — India

By CA V. Viswanathan — FCA, ACS, CFE, IBBI Registered Valuer (IBBI/RV/03/2019/12333). Updated for FY 2025-26.

FATCA (US Foreign Account Tax Compliance Act, implemented in India via the IGA dated July 2015) and CRS (OECD Common Reporting Standard, in force in India since 2017) require Indian Financial Institutions (FIs) to identify reportable accounts held by US persons (FATCA) or residents of CRS partner jurisdictions (CRS), conduct due diligence on those accounts, and report annually to the Income Tax Department in Form 61B. The reporting flows to the IRS (FATCA) and partner-jurisdiction tax authorities (CRS) under Automatic Exchange of Information (AEOI). Penalties for non-compliance are severe and the regulator's expectation has matured significantly since 2018.

Who Is a Reporting Financial Institution

Indian Income Tax Rules 114F-114H define four categories of Financial Institution: (1) Custodial Institution — substantial business is holding financial assets for the account of others (depositories, custodians); (2) Depository Institution — accepts deposits in the ordinary course of banking (banks, NBFCs accepting deposits); (3) Investment Entity — primarily conducts investing/managing financial assets, OR is managed by another FI (mutual funds, AIFs, PMS, family offices, holding companies primarily holding financial assets); (4) Specified Insurance Company — issues cash-value insurance or annuity contracts. The 'investment entity' category is the most expansive and frequently misunderstood — many family investment vehicles, holding companies, and even some operating companies fall within scope.

Account-Holder Due Diligence

FIs must conduct due diligence on every Financial Account to identify reportable accounts. Two categories: (a) Pre-existing accounts (held on the cut-off date, typically 30 June 2014 for FATCA, 31 December 2015 for CRS) — review of indicia (US/foreign address, US/foreign telephone, standing instructions to non-Indian accounts, US person fields); (b) New accounts — self-certification at account opening using prescribed forms. Threshold tests (e.g., $50,000 for individuals under FATCA pre-existing) reduce the diligence burden for low-value accounts. High-value accounts ($1 million+ for individuals) require enhanced review including relationship-manager inquiry.

Form 61B — What Is Reported

Form 61B (filed annually by 31 May) reports for each reportable account: (a) name, address, TIN of the account holder (and of controlling persons for entity accounts); (b) account number; (c) account balance/value at year-end; (d) gross amount of interest, dividends, gross proceeds from sale/redemption credited during the year; (e) other reportable income. For entity accounts where the entity is a 'Passive NFE' (Non-Financial Entity), the controlling persons (typically beneficial owners) who are reportable persons must also be identified and reported. The reporting flows to CBDT, then via AEOI to IRS or partner-jurisdiction tax authorities.

Common Compliance Failures

(1) Mis-classification — operating companies with significant treasury/financial-asset balance erroneously classified as 'Active NFE' when they qualify as Investment Entity. (2) Self-certification not collected for new accounts — penalty under Section 271FAA. (3) Pre-existing high-value accounts not reviewed for indicia by deadline. (4) Failure to identify controlling persons for entity accounts (especially trusts and family-investment vehicles). (5) Form 61B filing errors — TIN format, account-balance currency, classification codes. (6) Failure to update self-certifications when account holder changes residency. CBDT has issued multiple consequential demand notices; matter is also taken up in CIT(A) and ITAT proceedings.

Penalties and Consequences

Section 271FAA: failure to file Form 61B or filing inaccurate statement — penalty ₹50,000-₹5,00,000 per default. Section 273B provides for reasonable cause defence. CBDT has been issuing show-cause notices to FIs since 2020 for historical non-compliance. Beyond penalties, AEOI exchange of information may trigger source-state tax assessments — for individual account holders, undisclosed foreign income revealed via FATCA/CRS triggers Black Money Act penalties up to 300% and prosecution. Several high-profile India tax cases have originated from FATCA/CRS data.

Engagement Process

Phase 1 — Classification review: confirm whether your entity is an FI, what category, and any exclusions/exemptions. Phase 2 — Account inventory: identify all financial accounts maintained for others. Phase 3 — Due diligence: indicia review for pre-existing, self-certification process for new. Phase 4 — Reportable identification: classify each account holder by reportable jurisdiction. Phase 5 — Form 61B preparation and filing. Phase 6 — Ongoing compliance: standardised KYC inclusion of self-certification, annual refresh, change-of-circumstance handling. Fees: ₹2-15 lakhs per year depending on account volume and complexity.

How Virtual Auditor Delivers This

Virtual Auditor's CA-CS-IBBI Valuer team handles fatca & crs compliance — india as an integrated engagement — no hand-offs between firms, single point of accountability, fixed-fee transparency. CA V. Viswanathan (FCA, ACS, CFE, IBBI RV) personally reviews every engagement deliverable. Offices in Chennai, Bangalore, and Mumbai serve clients across India. Free 30-minute scoping consultation available — no obligation.

Get Started — Free Consultation

Call +91 99622 60333 or email support@virtualauditor.in to schedule a free 30-minute consultation with CA V. Viswanathan. No obligation. We will give you a clear scope, timeline, and fixed-fee quote within 24 hours of the call.