India joins multilateral treaty on automatic exchange of financial information

India has joined the Multilateral Competent Authority Agreement (MCAA) on automatic exchange of financial account information, with the country along with Australia, Canada, Costa Rica, Indonesia and New Zealand signing an agreement, in Paris today.

Indian ambassador to France, Mohan Kumar, signed the declaration to comply with the provisions of the MCAA, at a ceremony held in Paris.

Earlier, fifty-one countries / jurisdictions had joined the MCAA on 29 October, 2014 in Berlin and Switzerland became the fifty-second country to join the MCAA on 19 November 2014. Ghana and Seychelles joined the MCAA on 14 May 2015.

With six more countries joining the MCAA today, the total number of countries / jurisdictions agreeing to exchange information automatically in accordance with MCAA has gone to 60.

Ninety-four countries have committed to exchange information on an automatic basis from 2017 onwards as per the new global standards on automatic exchange of information, known as Common Reporting Standards (CRS) on Automatic Exchange of Information (AEOI).

The new global standards are very wide in scope and oblige the treaty partners to exchange wide range of financial information after collecting it from financial institutions in their country / jurisdictions, including information about the ultimate controlling persons and beneficial owners of entities.

For implementation of these standards in India and with a view to provide information to other countries, necessary legislative changes have been made through Finance (No. 2) Act, 2014, by amending section 285BA of the Income-tax Act, 1961. Necessary rules and guidelines are being formulated in consultation with financial institutions.

AEOI based on CRS, when fully implemented, would enable India to receive information from almost every country in the world, including offshore financial centres, and 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.