In the current scenario, we are now in a universal regime where an automatic exchange of tax information is the latest norm. As a matter of fact, more and more countries and jurisdictions are following the international protocols set by the Organisation for Economic Co-operation and Development (OECD). Also, the Financial Action Task Force (FATF) for tax transparency and combating instances of global money laundering, terror financing and tax evasion.
Recently, a special unit has been created by the Indian government in the nationwide investigation wings of the reputed Income Tax department. This unit will focus for probe in cases of undisclosed assets held by Indians who are staying abroad. It will also look into the possession of black money in foreign shores.
The Foreign Asset Investigation Units (FAIUs) have been created in all the 14 different investigation directorates of the tax department located in various parts of the country. These units are majorly tasked to undertake raids and seizures. It will also be responsible to develop intelligence to check taxation evasion done by various methods. To create these units, a total of 69 existing posts in the tax department were diverted by the Central Board of Direct Taxation. This was done after approval from Union Finance Minister Nirmala Sitharaman.
The newly created units will also be held responsible to probe cases of Indian entities named in global tax document leaks like the Panama Papers. Different Banks, mutual funds, insurance, pension and stock-broking firms will report their Indian customer details to the US which will be shared with New Delhi. In the same way, Indian entities will do reciprocal information sharing about Americans.
Presently, there is a significant amount of data coming in from various international and domestic sources. This needs to be examined for possible illegal foreign assets holding of an individual. Therefore, a dedicated wing was essentially required to analyze this information and go through this data.
The automatic tax information exchange protocols through which Indian direct tax authorities acquire information include the Double Taxation Avoidance Agreement (DTAA), Tax Information Exchange Agreements (TIEAs). And, the most recent one is Foreign Account Tax Compliance Act (FATCA) between India and the US. It covers the automatic sharing of information on bank accounts as well as financial products. These financial products include equities, mutual funds and insurance, and is aimed at fighting the threat of black money stashed abroad.
The Foreign Asset Investigation Units will be under the authority of the jurisdictional director general of income tax (investigation) rank officer. Its work will be directly monitored by the CBDT, according to the officials related to the department.
The Income Tax Return (ITR) forms also have a particular column seeking all the details of foreign assets of an individual or entity. And, these get clearly matched with the information obtained through automatic exchange from global counterparts. Any type of disparity requires a dedicated investigation and the new wing can very well take care of it.