Income Tax: The government sets up a special unit in the Income Tax Department to investigate secret foreign assets

NEW DELHI: The government has set up a special unit within the nationwide investigative branches of the Income Tax Administration to specifically investigate cases of undisclosed assets owned by Indians abroad and possession of black money on foreign shores, officials said. The Foreign Asset Investigation Units (FAIUs) have recently been set up in all 14 Investigative Directorates of the Tax Agency in different parts of the country, mainly tasked with conducting raids and seizures and developing intelligence to verify tax evasion using various methods.

A total of 69 existing posts in the tax department were “diverted” by the Central Board of Direct Taxes (CBDT) to the creation of this entity in November last year after Union Finance Minister Nirmala Sitharaman agreed, a senior official said.

The CBDT formulates guidelines for the income tax department.

“The FAIUs were created as new wings within the various investigative branches of the IRS to focus on cases of undisclosed assets held by Indians abroad and black money hidden abroad.

“India is now receiving extensive data in this regard through various newly signed treaties and some of those renegotiated in the recent past,” another official said.

We are now in a global regime where the automatic exchange of tax information is the norm. More and more countries and jurisdictions are following the international protocols of the Organization for Economic Co-operation and Development (OECD) and the Financial Action Task Force (FATF) for tax transparency and fighting cases of global money laundering, terrorist financing and tax evasion, he said.

The tax officer now has vast amounts of data from various international and domestic sources to check an individual’s possible illegal foreign assets, and therefore a special department was required to analyze this information and sift through this mountain of data, the official said.

The new entities will also investigate cases involving Indian companies named in global tax document leaks such as the Panama Papers.

The main automatic tax information exchange agreements or protocols through which Indian tax authorities receive information include the Double Taxation Avoidance Agreement (DTAA), the Tax Information Exchange Agreements (TIEAs) and the recent Foreign Account Tax Compliance Act (FATCA) between India and the US.

FATCA covers the automatic exchange of information about bank accounts and financial products such as stocks, mutual funds and insurance and aims to combat the threat of black money hidden abroad.

Banks, mutual funds, insurance, pension and stock brokerage firms will provide their Indian customer data to the US, which will be shared with New Delhi. Similarly, Indian entities will conduct a two-way information exchange on Americans.

The FAIUs will report to the senior officer of the relevant Director-General for Income Tax (Inquiry), and their work will be directly overseen by the Central Board of Direct Taxes, officials said.

The Income Tax Return (ITR) forms also have a separate column where details of an individual’s or legal entity’s foreign assets are looked up and this is obviously matched against the information obtained through the automatic exchange of global counterparts. Any discrepancy requires focused investigation, and the new wing does a very good job of doing that, they added.


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