The US Foreign Account Tax Compliance Act (FATCA), that is aimed at making sure tax is paid on income generated from wealth parked overseas, has made many US based NRIs consider selling their property in India, fearing that the new information sharing protocol may bring their assets, bank accounts, mutual funds and capital market investments in India under the scanner of US tax authorities.
Under the agreement the US and India will share information about citizens with assets in each other’s countries. At the moment it is not easy for the Indian government to identify property held by NRIs in India but cautious NRIs anticipate that systems will become more robust and details of their assets will be shared with the US, so they want to act before that happens.
Some US NRIs have already begun to seek out agents to help sell their property in India even at discount prices, so as to steer clear of the regulation. Other NRIs are transferring their property to relatives before selling them, in the hope the property will be sold before it is scrutinised by the authorities.
Right now NRIs in the US who declare they were unaware of the liability.are not penalised and they can utilise the IRS amnesty programme that allows taxpayers to return to compliance.
Experts say NRIs are not only selling their property in India, they are also avoiding investing in the country, wary of future complications. Banks too are reluctant to open accounts that will help US NRIs invest in India because it will increase their reporting obligations.