FATCA Declaration for NPS

FATCA Declaration required for National Pension System (NPS) compliance ensures tax transparency for international account holders.
FATCA Declaration for NPS
4 min
24-April-2024

FATCA stands for the Foreign Account Tax Compliance Act. FATCA is a law in the United States of America targeted towards curbing tax evasion and promoting healthy cooperation among countries internationally. It pertains to taxpayers in the US who have sources of income in other countries. In the Indian context, it concerns NRIs in the US who have investments in India. For example, if an NRI has invested in the National Pension System (NPS), they must self-certify the NPS FATCA declaration.

What is FATCA?

The FATCA law was enacted in 2010 to augment the taxation framework in the United States. It was a component of the Hiring Incentives to Restore Employment (HIRE) Act. FATCA’s primary objective is to improve tax compliance among US taxpayers with accounts and investments in other countries. FATCA requires compliance from foreign institutions. Under this, the foreign institutions in countries that are a part of the agreement have to report on the assets owned by taxpayers of the United States in their countries. This reduces tax evasion and promotes healthy financial cooperation among participating countries.

In addition, the law mandates that US taxpayers declare their foreign holdings in annual reports.

What is NPS

The National Pension System is an initiative of the Government of India, first introduced in 2004. It seeks to cover all Indians under the post-retirement social security net to promote financial security. The NPS scheme is also open for NRI investments. Under the NPS scheme, a member’s payments are invested in the debt and equities markets. The NPS interest rate is dependent on the market returns and is calculated every month. Thus, the final pension amount that the member receives varies based on the returns from these investments.

All Indian citizens aged 18-70 years can open an NPS account. NPS accounts reach maturity when you turn 60, with an option to extend it till 70.

Why is the NPS FATCA declaration needed

After the brief overview of NPS and FATCA, let us now understand why FATCA is necessary for NRIs who have invested in the NPS.

FATCA covers all citizens, residents, and non-resident aliens. It helps individuals avoid double taxation and comply with the taxation policies of both countries. While the FATCA declaration for NPS is the major topic of discussion, the FATCA declaration is broader and covers a wide range of incomes and investments. For example, the investments include mutual funds, fixed deposits, NPS, equities, bank interest, PPF, and capital gains. These must be declared under FATCA. On the other hand, jewellery, automobiles, and household assets are just a few examples of exemptions from the FATCA.

The Indian government approved FATCA in 2015, mandating all NRIs in the US who are drawing income from investments in India, like the NPS or mutual funds, submit a self-certified FATCA declaration. This declaration is then validated by the concerned financial institution in India.

FATCA self-declaration

Self-declaration of FATCA in NPS investments is mandatory. Through self-certification, NRIs must report to financial institutions the details of their assets and incomes. All NPS accounts that have been opened with National Securities Depository Limited (NSDL) post July 1, 2014, are liable to be blocked without NPS FATCA declaration.

Steps for NPS FATCA declaration

If you want to ensure that your NPS account is FATCA compliant, follow the steps below:

  • For NPS FATCA self-declaration, visit the official portal of NSDL.
  • From the options presented on the left side of the screen, choose ‘FATCA Compliance’.
  • After this, you will be redirected to another tab to self-certify the declaration.
  • Here, you have to input your Permanent Retirement Account Number (PRAN) and click ‘Submit’.
  • The next step is to fill out your details in the FATCA self-declaration form. These details include name, income, PAN number, city, nationality, residence, occupation, and country of birth. If applicable, you must also fill in the tax residency number.
  • Next, you have to check the box to sign and authorise the form.
  • After this, an OTP will be sent to your registered mobile number.
  • After the final OTP verification, you will receive an acknowledgement of the NPS FATCA declaration.

Components of the NPS FATCA declaration form

  • Basic information: Name, PAN, date of birth, etc.
  • Part I: This includes information on the country of your birth, citizenship, and residence for taxation purposes.
  • Part II: If you are a US citizen, you must input the Tax Identification Number (TIN).
  • Part III: This step has the declaration that you must sign. This involves reviewing the information you have put in and ensuring all the details are correct before signing it.
  • Part IV: You are only required to complete this section if the country mentioned in Part I is not India and the TIN is unavailable. You must complete this if you are a US citizen but do not have a TIN.

Conclusion

The FATCA declaration for NPS serves as a crucial step in ensuring compliance with international tax regulations, particularly for NRIs residing in the US who have investments in India, such as the National Pension System (NPS). FATCA, designed to prevent tax evasion and promote transparency in cross-border financial activities, necessitates NRIs to submit a self-certified declaration regarding their foreign assets and incomes, including NPS investments.

This declaration, mandated by the Indian government since 2015, is essential for avoiding double taxation and aligning with the taxation policies of both countries.

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Frequently asked questions

Are FATCA details required for Indian citizens?

Yes, but only for Indian citizens who are taxpayers in the US. Non-resident Indians (NRIs) and People of Indian Origin (PIO) are mandated to submit FATCA declarations if they have investments in India. The Indian government approved FATCA in 2015, which covers income from investments in India, like the NPS or mutual funds.

Where can I find my FATCA details?

To check your FATCA details, the first step is to log in to your NPS account on the official portal. By navigating to the ‘FATCA Self-Certification’, you will be able to fill in, view, and submit the details for your FATCA declaration.

Do I need to fill FATCA details in NPS online?

Yes, to ensure that your NPS account complies with the FATCA guidelines, you can log in to your NPS account and fill out the FATCA declaration form. This form can be self-certified. However, make sure to have all the requisite information and documentation handy.

Disclaimer

As regards deposit taking activity of Bajaj Finance Ltd (BFL), the viewers may refer to the advertisement in the Indian Express (Mumbai Edition) and Loksatta (Pune Edition) furnished in the application form for soliciting public deposits or refer https://www.bajajfinserv.in/fixed-deposit-archives
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