If you are a green card holder or a US citizen and investing abroad (7 countries initially) and about 130 countries in 2 years time..well the data is going to your IRS. This means even if you have unintentionally or by mistake not declared some income / asset in your home country, you could be in trouble.
Typically in India a single mother with a son abroad holds her bank fixed deposits, mutual funds, etc. jointly with her son/ daughter. Such investments may be interpreted by the US authorities differently, so please ask your CPA about such investments.
One unintended outcome of this of course is that most Indian mutual funds are not keen at all to allow the NRI from US to invest. It is too expensive and too much of a bother to accept money from NRIs from US and Canada. Not worth it.
IRS Commissioner John Koskinen said the agreement “is a major milestone in IRS efforts to combat offshore tax evasion through FATCA and the intergovernmental agreements.” FATCA is an “important tool against offshore tax evasion, and this is a significant step in the process.” He said this in an interview to an advisor magazine in the USA.
Banks are very worried about Fatca and the US is capable of levying such huge fines that it might become impossible for banks to operate there. So an ICICI bank or a Hdfc bank will be extra careful before they deal with you. Similarly funds with a majority US holding – like Franklin Templeton may be more strict while implementing this. Hdfc mutual fund is perhaps not even accepting application forms from American investors – even if they are NRIs. I am not sure, and I have personally not verified this.
So what is the solution?
Frankly the law is just emerging. Go to your CPA and seek the following clarifications:
what happens to investments already made in say the growth option?
if you are a second holder with your parent (the money belongs to your parent, surely)
if you are named a nominee in a will DO YOU HAVE to declare anything now?
if you already have investments and the fund house declares dividends what should u do?
if you sell it off now how will the capital gains be taxed in US (in India it is tax free.
…make a start !!
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