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Due diligence requirement

Rule 114H - MISCELLANEOUS - Income Tax - Rule 114H - 114H. .- (1) An account shall be treated as a reportable account beginning as on the date it is identified as such pursuant to the due diligence procedure specified in sub-rule (3) to sub-rule (8) and, unless otherwise provided, information with respect to a reportable account shall be reported annually in the calendar year following the calendar year to which the information relates. (2) For the purpose of this rule,- (a) "documentary ev .....

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h respect to an entity, any official documentation issued by an authorized Government body, including a Government agency or a municipality, which includes the name of the entity and either the address of its principal office in the country or territory in which it claims to be a resident or the country or territory in which the entity was incorporated or organized; (iv) any financial statement, third-party credit report, bankruptcy filing, or a report of the Government agency regulating the sec .....

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ans a pre-existing individual account with a balance or value that,- (i) in case of a U.S. reportable account, exceeds an amount equivalent to fifty thousand U.S. dollars but does not exceed an amount equivalent to one million U.S. dollars as on the 30th June, 2014; and (ii) in case of other reportable account, does not exceed an amount equivalent to one million U.S. dollars as on the 31st December, 2015; (d) "new account" means a financial account maintained by a reporting financial i .....

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l account maintained by a reporting financial institution as on,- (I) in case of a U.S. reportable account, the 30th June, 2014; and (II) in case of other reportable account, the 31st December 2015; (i) "pre-existing entity account" means a pre-existing account held by one or more entities; (j) "pre-existing individual account" means a pre-existing account held by one or more individuals; (k) where a balance or value threshold is to be determined at the end of a calendar year .....

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exceed an amount equivalent to fifty thousand U.S. dollars, subject to sub-clause (vi) of clause (c) of this sub-rule; or (B) which is a cash value insurance contract or an annuity contract, the balance or value does not exceed an amount equivalent to two hundred and fifty thousand U.S. dollars as on the 30th June, 2014, subject to sub-clause (vi) of clause (c) of this sub-rule; or (C) which is a cash value insurance contract or an annuity contract, the reporting financial institution, under any .....

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espect to lower value accounts among pre-existing individual accounts the following procedures shall apply, namely:- (i) the reporting financial institution must review electronically searchable data maintained by the reporting financial institution for any of the following indicia, and apply provisions contained in sub-clauses (ii) to (v), namely:- (A) identification of the account holder as a resident of any country or territory outside India for tax purposes or unambiguous indication of a pla .....

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than with respect to a depository account) to transfer funds to an account maintained in a country or territory outside India; or ] (E) currently effective power of attorney or signatory authority granted to a person with an address in a country or territory outside India; or (F) a "hold mail" instruction or "in-care-of" address in a country or territory outside India if the reporting financial institution does not have any other address on file for the account holder; (ii) .....

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account, then the reporting financial institution shall treat the account holder as resident for tax purposes of each such country or territory for which an indicium is identified, unless it elects to apply sub-clause (v) and one of the exceptions in the said sub-clause applies with respect to that account; (iv) if a "hold mail" instruction or "in-care-of" address is discovered in the electronic search and no other address and none of the other indicia listed in items (A) to .....

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ful, the reporting financial institution shall report the account as an undocumented account; (v) notwithstanding a finding of indicia under sub-clause (i), a reporting financial institution is not required to treat an account holder as a resident, for tax purposes,- (A) of United States of America if, the account holder's information unambiguously indicates a place of birth in the United States of America and the reporting financial institution obtains, or has previously reviewed and mainta .....

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holder does not have such a certificate despite relinquishing citizenship of the United States of America; or (2) the reason, the account holder did not obtain citizenship of the United States of America at birth; (B) of any country or territory outside India if, the account holder's information contains a current mailing or residence address in any country or territory outside India, one or more telephone numbers in any country or territory outside India (and no telephone number in India) .....

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nd (II) documentary evidence establishing the account holder's non-reportable status; (C) of any country or territory outside India if, the account holder's information contains a currently effective power of attorney or signatory authority granted to a person with an address in a country or territory outside India, or one or more telephone numbers in any country or territory outside India (if an Indian telephone number in also associated with the account), the reporting financial instit .....

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y:- (i) the reporting financial institution must review electronically searchable data maintained by the reporting financial institution for any of the indicia described in sub-clause (i) of clause (b); (ii) if the reporting financial institution's electronically searchable databases do not capture all of the information referred to in sub-clause (iii) of this clause, then the reporting financial institution shall also review the current customer master file and, to the extent not contained .....

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tion of Money-laundering Act, 2002 (15 of 2003) or any other law for the time being in force; (D) any power of attorney or signature authority forms currently in effect; and 3[ (E) in case of U.S. reportable account, any standing instructions to transfer funds currently in effect and in case of other reportable account any standing instructions (other than with respect to a depository account) to transfer funds currently in effect: ] Provided that where the electronically searchable databases in .....

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for tax purposes; (B) the account holder's residence address and mailing address currently on file with the reporting financial institution; (C) the account holder's telephone number or numbers currently on file, if any, with the reporting financial institution; (D) in the case of financial accounts other than depository accounts, whether there are standing instructions to transfer funds in the account to another account (including an account at another branch of the reporting financial .....

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(including any financial accounts aggregated with that high value account) if the relationship manager has actual knowledge that the account holder is a reportable person; (v) after application of review procedures specified in sub-clauses (i) to (iv) if,- (A) none of the indicia referred to in sub-clause (i) of clause (b) are discovered, and the account is not identified as held by a reportable person as per sub-clause (iv), then further action is not required until there is a change in circum .....

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ects to apply sub-clause (v) of clause (b) and one of the exceptions in the said sub-clause applies with respect to that account; (C) a "hold mail" instruction or "in-care-of" address is discovered in the electronic search and no other address and none of the other indicia referred to in items (A) to (E) of sub-clause (i) of clause (b) are identified for the account holder, the reporting financial institution shall obtain from such account holder a self-certification or docum .....

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unt as on the last day of year 2015 (for U.S. reportable account) or last day of any subsequent calendar year (for all reportable accounts), the reporting financial institution shall complete the enhanced review procedures specified in this clause with respect to such account within the calendar year following the year in which the account becomes a high value account and if based on such review the account is identified as a reportable account, the reporting financial institution shall report t .....

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clause (iv), to the same high value account in any subsequent year unless the account is undocumented where the reporting financial institution shall re-apply them annually until such account ceases to be undocumented; (viii) if there is a change of circumstances with respect to a high value account which results in one or more indicia referred to in sub-clause (i) of clause (b) being associated with the account, then the reporting financial institution must treat the account as a reportable acc .....

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any country or territory outside India, the reporting financial institution is required to treat the new address as a change in circumstances and, if it elects to apply sub-clause (v) of clause (b), then it is required to obtain the appropriate documentation from the account holder; (d) review of pre-existing individual account,- (i) in case of a U.S. reportable account which is high value account as on the 30th June, 2014, shall be completed by the 31st December, 2015 and if based on this revi .....

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reportable account which is high value account as on the 31st December, 2015, shall be completed by the 31st December, 2016; ] (iii) in case of other reportable account that is low value account as on the 31st December, 2015, must be completed by the 30th June, 2017; (e) any pre-existing individual account which has been identified as a reportable account under this sub-rule shall be treated as a reportable account in all subsequent years, unless the account holder ceases to be a resident of any .....

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at the end of any calendar year; (ii) a cash value insurance contract unless the cash value exceeds an amount equivalent to fifty thousand U.S. dollars at the end of any calendar year; (b) in case of a new individual account,- (i) in respect of a U.S. reportable account, which does not fall under sub-clauses (i) and (ii) of clause (a), upon account opening (or within ninety days after the end of the calendar year in which the account ceases to be covered under sub-clauses (i) and (ii) of clause .....

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e account, including any documentation collected in accordance with Prevention of Money-laundering (Maintenance of Records) Rules, 2005; (c) where the self-certification obtained under clause (b) of this sub-rule establishes that the account holder is resident for tax purposes in a country or territory outside India, the reporting financial institution shall treat the account as a reportable account and the self-certification shall also include the account holder's taxpayer identification nu .....

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he said self-certification and shall obtain a valid self-certification that establishes the residence or residences for tax purposes of the account holder: Provided that if the reporting financial institution is unable to obtain a valid self-certification, the reporting financial institution shall treat the account as a reportable account with respect to each such country or territory outside India for which an indicium is identified. (5) The following procedures shall apply for purposes of iden .....

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, or as the case may be, 31st December, 2015 (in case of other reportable account), is not required to be reviewed, identified, or reported as a reportable account until the aggregate account balance or value exceeds an amount equivalent to two hundred and fifty thousand U.S. dollars as of the last day of any subsequent calendar year; (b) a pre-existing entity account that has an aggregate account balance or value that exceeds an amount equivalent to two hundred and fifty thousand U.S. dollars a .....

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red and fifty thousand U.S. dollars as of the last day of any subsequent calendar year, shall be reviewed in accordance with the procedure provided in clause (d) of this sub-rule; (c) with respect to pre-existing entity accounts referred to in clause (b), only accounts which are held by,- (i) one or more entities which are reportable persons; or (ii) passive non-financial entity with one or more controlling persons who are reportable persons, shall be treated as reportable accounts: Provided tha .....

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re reportable persons, or by non-participating financial institutions, shall apply the following review procedures namely:- (i) to determine whether the entity is a reportable person, the reporting financial institution shall,- (A) review information maintained for regulatory or customer relationship purposes (including information collected in accordance with the rules made under the Prevention of Money-laundering Act, 2002 (15 of 2003)) to determine whether the information indicates that the a .....

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a self-certification from the account holder, or reasonably determines based on information in its possession or that is publicly available, that the account holder is not a reportable person: Provided that if the information as per item (A) indicates that the account holder is an entity not based in the United States of America which is a financial institution, or the reporting financial institution verifies the account holder's Global Intermediary Identification Number, then the account sh .....

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ancial institution,- (I) obtains a self-certification from the account holder that it is a financial institution referred to in sub-clauses (a) to (m) of clause (5) of rule 114F; or (II) in the case of participating foreign financial institution defined in Annex II of the FATCA agreement or a financial institution referred to in sub-clauses (e) to (m) of clause (5) of rule 114F, verifies the account holder's Global Intermediary Identification Number; (iii) the reporting financial institution .....

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n from the account holder to establish its status, unless it has information in its possession or which is publicly available, based on which it can reasonably determine that the account holder is an active non-financial entity or a financial institution other than an investment entity referred to in sub-clause (B) of clause (c) of Explanation to clause (3) of rule 114F; (B) for purposes of determining the controlling persons of an account holder, a reporting financial institution may rely on in .....

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nt held by one or more non-financial entity with an aggregate balance or value which does not exceed an amount equivalent to one million U.S. dollars; or (II) a self-certification from the account holder or such controlling person of the passive non-financial entity with an account balance or value which exceeds an amount equivalent to one million U.S. dollars; (D) if any controlling person of a passive non-financial entity is a resident of any country or territory outside India for tax purposes .....

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unt balance or value that exceeds an amount equivalent to two hundred and fifty thousand U.S. dollars as on the, 31st December, 2015 (in case of other reportable account) shall be completed by the 31st December, 2016; ] (ii) review of pre-existing entity accounts with an aggregate account balance or value which does not exceed an amount equivalent to two hundred and fifty thousand U.S. dollars as on the 30th June, 2014 (in case of a U.S. reportable account), or as the case may be, 31st December, .....

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know, or have reason to know, that the self-certification or other documentation associated with the account is incorrect or unreliable, the reporting financial institution shall re-determine the status of the account in accordance with the procedures set forth in clause (d) of this sub-rule. (6) The following procedures shall apply for purposes of identifying reportable accounts and accounts held by non-participating financial institutions among new entity accounts, namely:- (a) a reporting fin .....

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s of such self-certification based on the information obtained by the reporting financial institution in connection with the opening of the account, including any documentation collected in accordance with the rules made under the Prevention of Money-laundering Act, 2002 (15 of 2003): Provided that if the entity certifies that it has no residence for tax purposes, the reporting financial institution may rely on the address of the principal office of the entity to determine the residence of the a .....

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cipating financial institution or a participating foreign financial institution or a non-reporting financial institution then the account shall not be treated as a U.S. reportable account; (ii) determine whether the account holder is a passive non-financial entity with one or more controlling persons who are reportable persons and in making these determinations the reporting financial institution shall follow the following procedures, namely:- (A) for purposes of determining whether the account .....

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ned in accordance with the rules made under the Prevention of Money-laundering Act, 2002 (15 of 2003); (C) for purposes of determining whether a controlling person of a passive non-financial entity is a reportable person, a reporting financial institution may rely on a self-certification from the account holder or such controlling person; (b) the reporting financial institution shall determine whether the account holder is a non-participating financial institution and in such case any payment to .....

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at an individual beneficiary (other than the owner) of a cash value insurance contract or an annuity contract receiving a death benefit is not a reportable person and may treat such financial account as other than a reportable account unless the reporting financial institution has actual knowledge, or reason to know, that the beneficiary is a reportable person: Provided that if a reporting financial institution has actual knowledge, or reason to know, that the beneficiary is a reportable person, .....

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egation of account balance and currency shall apply, namely:- (i) for purposes of determining the aggregate balance or value of financial accounts held by an individual, a reporting financial institution shall be required to aggregate all financial accounts maintained by it, or by a related entity, but only to the extent that the computerised systems of that reporting financial institution links the financial accounts by reference to a data element such as client number or taxpayer identificatio .....

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payer identification number, and allows account balances or values to be aggregated; (iii) for purposes of determining the aggregate balance or value of financial accounts held by a person to determine whether a financial account is a high value account, a reporting financial institution shall also be required, in the case of any financial accounts that a relationship manager knows, or has reason to know, are directly or indirectly owned, controlled, or established (other than in a fiduciary cap .....

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of a financial account provided in such rules. Explanation 1.- For the purposes of this clause each holder of a jointly held financial account shall be attributed the entire balance or value of the jointly held financial account for purposes of applying the aggregation requirements. (8) In case of a U.S. reportable account opened on or after the 1st July, 2014 but before the date of entry into force of FATCA agreement, notwithstanding the due diligence procedures specified in sub-rule (4) or sub .....

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sub-rule (4) and confirm the reasonableness of such self-certification consistent with the procedures specified in sub-rule (4); and (ii) with respect to a new entity account opened on or after the 1st July, 2014 but before the date of entry into force of FATCA agreement, perform the due diligence procedures specified in sub-rule (6) and request for information as necessary to document the account, including any self-certification, required under sub-rule (6); (b) the reporting financial instit .....

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.S. reportable account or as an account held by a non-participating financial institution, as applicable: Provided that the information required to be reported with respect to such a new account shall be information which would have been reportable had the new account been identified as a U.S. reportable account or as an account held by a non-participating financial institution, as applicable, as of the date the account was opened; (c) by the date that is one year after the date of entry into fo .....

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e accounts), perform the due diligence procedure specified in clause (c) of sub-rule (3), or (ii) with respect to such closed accounts which prior to such closure were new entity accounts, perform the due diligence procedures specified in sub-rule (5); and (d) the reporting financial institution shall report the information specified in rule 114G in respect of any closed account which is identified under clause (c) as a U.S. reportable account or as an account held by a non-participating financi .....

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