A communication issued by the Central Board of Direct Taxes, as F. No. 504/090/2007-FTD-I, dated 19 February 2016. Issued under section 285BA.
A communication from the Foreign Tax and Tax Research Division of the Central Board of Direct Taxes to financial institutions, answering questions on the due diligence and reporting obligations under rules 114F to 114H of the Income-tax Rules, 1962, made under section 285BA. It was issued as the first reporting cycles approached and deals with the classification questions institutions could not resolve from the rules alone.
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 Board answers a series of specific questions. On currency, it states that all reporting has to be done in Indian rupees for the March and May 2016 filings, with modifications to Form 61B contemplated for 2017. On fixed deposits, it allows a new deposit account to be treated as a pre-existing account where the linked savings account predates the relevant cut-off date, 30 June 2014 for FATCA and 31 December 2015 for the common reporting standard, provided the know your customer procedures are complete and the accounts are treated as linked. On custody arrangements, the local sub-custodian must carry out due diligence on accounts held by the global custodian's end clients, though it may rely on the global custodian's documentation. A Hindu undivided family account is to be treated as an entity account. A deposit-taking non-banking financial company is a depository institution; one functioning as an investment entity reports accordingly.
Rules 114F to 114H use categories built for the American and the OECD frameworks, and Indian banking has account types those frameworks did not contemplate. Nobody could say from the rules whether a Hindu undivided family account was an individual or an entity account, whether a fixed deposit opened after the cut-off but linked to an old savings account was new, or where a non-banking financial company sat. Each question changed the due diligence path and the reporting outcome, so the Board answered them before the first filings fell due.
The clarifications bind the department's officers and settle how the field is to read the rules. They do not bind the financial institution, which may take a different view of rules 114F to 114H, nor the account holder, and they are not binding on the Tribunal or on a court. Where the clarification and the rule diverge, the rule prevails, because the Board cannot enlarge or cut down subordinate legislation by a letter.
Issued on 19 February 2016 and directed at the March and May 2016 reporting. The cut-off dates it applies are 30 June 2014 for FATCA and 31 December 2015 for the common reporting standard.
This is the earliest of several rounds of clarification and much of it was superseded, first by the further clarifications of 26 May 2016 and then by the guidance note and by changes to Form 61B. The rupee reporting instruction was expressly for the 2016 cycle only. The treatment of a Hindu undivided family as an entity account is the point most often missed, because it brings in the controlling person analysis that an individual account would not require.
an HUF account shall be treated as an entity account
— the Central Board of Direct Taxes, communication F. No. 504/090/2007-FTD-I, 19 February 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 number, 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 letter cites no provision in its header; section 285BA is stated here because it is the section under which rules 114F to 114H are made, not because the document names it. The fetch returned the substance of the main answers but not the complete list of questions or the full text of each reply.