What FATCA and CRS are
The IFSCA (Anti Money Laundering, Counter-Terrorist Financing and Know Your Customer) Guidelines, 2022 define both:
- FATCA is the Foreign Account Tax Compliance Act, 2010 of the United States, which requires reporting financial institutions to report financial accounts held by US taxpayers, or by foreign entities in which US taxpayers hold a substantial ownership interest (clause 1.3.17).
- CRS, the Common Reporting Standards, are the reporting standards for implementing the multilateral agreement to exchange information automatically under Article 6 of the Convention on Mutual Administrative Assistance in Tax Matters (clause 1.3.8).
India implements both through its income-tax law. Information reported to the Indian tax authorities is exchanged with partner jurisdictions.
The legal basis in India
Since 1 April 2026 the duty rests on section 508 of the Income-tax Act, 2025. A "prescribed reporting financial institution" (section 508(1)(k)) that maintains records of any reportable account must furnish a statement on it to the prescribed authority. The rules fix the period, time, form and manner (section 508(2)), and the Central Government may make rules on registration, the information to be kept and the due diligence for identifying reportable accounts (section 508(9)).
- A defect notified by the tax authority must be rectified within thirty days, or any extended period (section 508(5) and (6)).
- A person who fails to file may be served a notice requiring the statement within thirty days (section 508(7)).
- A person who later finds an inaccuracy must report and correct it within ten days (section 508(8)).
Under the Act as amended by the Finance Act, 2026, a late statement attracts a fee of Rs 200 a day up to Rs 1,00,000, and failure to file after a section 508(7) notice a penalty of Rs 1,000 a day up to Rs 1,00,000. Inaccurate statements and failure to carry out due diligence carry a further penalty under section 455, including a sum per inaccurate reportable account where the inaccuracy comes from false information given by the account holder; the institution may recover that sum from the holder.
What IFSCA requires
Clause 11.5 of the IFSCA Guidelines requires each regulated entity to determine whether it is a reporting financial institution as defined in the income-tax rules and, if so, to:
- register as a reporting financial institution on the Income Tax Department's e-filing portal;
- submit reports online using the digital signature of its Designated Director, uploading the statement (Form 61B under the earlier rules) or a nil report, using CBDT's schema;
- use the FEDAI spot reference rates when applying the due diligence thresholds;
- build an IT framework to carry out and record due diligence;
- audit that framework and its compliance;
- constitute a High Level Monitoring Committee under the Designated Director or an equivalent functionary; and
- follow CBDT's guidance notes, rules and press releases, including on closure of financial accounts.
The Guidelines refer to rules 114F to 114H of the Income-tax Rules, 1962. From 1 April 2026 the corresponding provisions are in the Income-tax Rules, 2026, so check the current rule numbers and forms before the first filing. See compliance calendar.
Who is likely to be in scope
Classification turns on the definitions in the rules, not on the IFSCA licence. As a working guide, entities that hold financial accounts for customers, such as banking units, custodians, broker-dealers and investment funds and their managers, should expect to analyse their position in detail. An entity that holds no customer accounts may conclude that it is not a reporting financial institution, and should record that conclusion and the reasons. A registered institution with nothing to report still files a nil report.
What to plan for
- Onboarding. Collect self-certifications of tax residence and US status from every account holder, and identify controlling persons of entity holders. Align this with beneficial ownership checks under the AML Guidelines. See AML, CFT and KYC.
- Systems before clients. Put the due diligence and reporting system in place before the first account is opened, not at the first year end.
- Annual cycle. Register, review accounts against the thresholds, prepare the statement, have the Designated Director sign it digitally, file, and keep the records.
- Governance. Minute the High Level Monitoring Committee's reviews and the audit of the framework.
- Corrections. Act within ten days on any inaccuracy found after filing.