Missing tax IDs under scanner: Income tax department seeks changes in account-opening rules to improve foreign tax reporting

The Income Tax Department plans to engage with financial sector regulators to seek changes in account-opening requirements to improve the accuracy of financial information shared with foreign jurisdictions under international tax reporting agreements, PTI reported.

According to PTI, Das said 97-98 per cent of the defects identified in reports exchanged with foreign jurisdictions relate to Tax Identification Numbers (TINs), which are either missing, incorrectly formatted or do not match the actual identification numbers.

He clarified that the reporting requirements concern foreign residents who invest in India and not Indians investing overseas.

The reporting framework involves international arrangements such as the Foreign Account Tax Compliance Act (FATCA) and Common Reporting Standard (CRS), alongside compliance requirements under the Prevention of Money Laundering Act (PMLA).

PTI reported that the percentage of reporting defects has been declining annually, even as the volume of reports has increased with more foreign residents investing in India.

The department also plans to continue training and outreach programmes for compliance officers, relationship managers and account-opening personnel to improve data collection and reporting.

On enforcement, Das told PTI that the department favours a collaborative approach, with penalties primarily reserved for deliberate defaults.

"We would like it to be more collaborative, and penalties should be the exception, not the rule," he said.

-With PTI inputs_