India has finally signed the Multilateral Competent Authority Agreement (MCAA) on Automatic Exchange of Financial Account Information. The declaration to comply with the provisions of the agreement was signed in Paris.
- 54 countries have already joined the MCAA.
- India is among six countries that joined this pact in Paris, taking the number to 60.
- The target is to reach 94 countries by 2017.
- The new system, also known as the Common Reporting Standards (CRS) on Automatic Exchange of Information (AEOI), is very wide in scope and obliges the treaty partners to exchange a wide range of financial information, including that about the ultimate controlling persons and beneficial owners of entities.
- To be able to comply with the new system, amendments have been made to section 285BA of the Income Tax Act, 1961. Necessary rules and guidelines are being formulated in consultation with financial institutions.
- Previously, information was exchanged between countries on the basis of specific requests relating to cases of tax evasion and other financial crimes.
- AEOI, when fully implemented, sets up a system wherein bulk taxpayer information will periodically be sent by the source country of income to the country of residence of the taxpayer.
Benefits of the Agreement:
- This would be the key to prevent international tax evasion and avoidance and would be instrumental in getting information about assets of Indians held abroad including through entities in which Indians are beneficial owners.
- This will help the Government to curb tax evasion and deal with the problem of black money.
Sources: PIB, BS.