A communication issued by the Central Board of Direct Taxes, dated 26 May 2016. Issued under section 285BA.
A communication of the Foreign Tax and Tax Research Division of the Central Board of Direct Taxes answering questions raised by financial institutions on the reporting obligations in rules 114F to 114H of the Income-tax Rules, 1962, which implement FATCA and the common reporting standard under section 285BA. It follows an earlier set of clarifications and deals with the practical problems that surfaced once institutions began the due diligence exercise in earnest.
This one does not fall neatly into the Board's usual classes — it is a letter, a memorandum, a consultation paper or something else the department has published in this collection. What it is, and what weight it carries, is set out below.
The clarifications are point by point. On self-certification, the Board accepts that it may be obtained through the internet banking platform from a user account where the customer has transaction rights, and not only on paper. On taxpayer identification numbers, it clarifies that the number need not be collected by the financial institution where the relevant country or territory outside India does not issue one, including any functional equivalent. On valuing an account holding securities, it accepts the values regularly communicated by the depository to the depository participants and brokers, so that institutions need not build an independent valuation. It also records that a fresh notification, Notification No. 4 dated 6 April 2016, has been issued by the Principal Director General of Income-tax (Systems) prescribing the reporting procedure.
Rules 114F to 114H import concepts from the inter-governmental agreement and the common reporting standard that do not sit naturally on Indian banking practice. Institutions could not obtain wet-signature self-certifications from millions of account holders, could not supply a taxpayer identification number for jurisdictions that issue none, and had no agreed way of valuing securities in a custody account. Each of these threatened to make compliance impossible rather than merely difficult, and the Board answered them so that the first reporting cycle could actually be completed.
These are the Board's answers to its own officers as much as to the industry, and they bind the department. A financial institution may rely on them, but is not bound by them and may satisfy rules 114F to 114H in some other way; equally, no Tribunal or court is required to accept the Board's reading of those rules. Where a clarification and the rule part company, the rule governs.
Issued on 26 May 2016 and operative from then for the reporting then under way. The reporting procedure it points to is that prescribed by Notification No. 4 dated 6 April 2016 of the Principal Director General of Income-tax (Systems).
These clarifications are dated and were themselves overtaken, first by the guidance note and later by amendments to the rules and to the reporting procedure. Do not rely on them for a current filing without checking what replaced them. The concession on internet banking self-certification is tied to a user account with transaction rights, and a view-only or non-transacting login does not meet it.
TIN is not required to be collected by the FIs if TIN (including its functional equivalent) is not issued by the relevant country or territory outside India.
— the Central Board of Direct Taxes, communication, 26 May 2016. Read it in the department’s own PDF.
| Under the Income-tax Act, 1961 | Now, in the Income-tax Act, 2025 |
|---|---|
| section 285BA | section 508 |
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What here is the Board’s and what is ours. The document is the Central Board of Direct Taxes’ own. Its date and the words quoted above are reproduced from the Board’s own PDF, which is here. Everything else on this page is ours: the plain-English account of what the document is and what it does, the reading of which provision it turns on, the note on what to watch, and the choice of cases. Where our account and the document part, the document governs.
An order of the Board binds the department, not you and not a court. The Board writes to its own officers. An assessee may hold the department to an order or an instruction that helps him; the department cannot hold an assessee to one that hurts him, and the Tribunal and the courts decide the law for themselves. This is the most common mistake made with this material, and it is worth making twice: a direction of the Board is not a section of the Act.
We did not read all of it. The department’s file returned only part of this document to us, so what is written above is written from the part we could read. Open the PDF before you rely on it.
What we could not settle. The F. No. printed on the letter did not come through legibly in the fetched text and has been left blank rather than guessed. The fetch returned the substance of the main clarifications but not the full list of questions answered, and one reference to the depositories was garbled.