New Delhi: India and five other nations Wednesday joined a multilateral agreement for automatic exchange of financial information, a move that will help it combat tax evasion and deal with the problem of black money.
Australia, Canada, Costa Rica, Indonesia and New Zealand are the other five nations that signed the Multilateral Competent Authority Agreement (MCAA) in Paris for automatic exchange of financial account information.
The total number of countries which have agreed to share financial information has now gone up to 60, including Switzerland.
Once fully implemented, the agreement "will help the government to curb tax evasion and deal with the problem of black money", a finance ministry release said.
On behalf of India, the declaration to comply with the provisions of the MCAA was signed by the country's ambassador to France Mohan Kumar, it said.
The Automatic Exchange of Information (AEOI) based on common reporting standards (CRS), the release said, "would enable India to receive information from almost every country in the world including offshore financial centres and would be the key to prevent international tax evasion and avoidance.
"(It) would be instrumental in getting information about assets of Indians held abroad including through entities in which Indians are beneficial owners".
India, it added, had already undertaken necessary legislative steps in Finance Act, 2014, to comply with the global norms for automatic exchange of information.
"Necessary rules and guidelines are being formulated in consultation with financial institutions," it added.
In order to unearth illegal funds stashed abroad, Parliament recently approved a stringent law to deal with black money which will come into force from April 1, 2016.
The Black Money Undisclosed Foreign Income and Assets (Imposition of Tax) Bill, 2015, provides for a steep 120 percent tax and penalty on undisclosed foreign assets and income besides a jail term of up to 10 years.
The group of 20 developing and developed nations had in September decided to put in place a mechanism for automatic exchange of tax information between various countries by 2017 or end 2018.
The new framework will mark a significant forward movement from the current practice of information exchange mostly on the basis of requests and only in the cases of suspected tax evasion or other financial crimes.
The new global standard, as formulated by Paris-based Organisation for Economic Cooperation and Development (OECD) in July last year, would be common for all countries.
It would facilitate a "systematic and periodic transmission of bulk taxpayer information by the source country of income to the country of residence of the taxpayer concerning various categories of income or asset information".
For implementation of these standards in India and with a view to providing information to other countries, India has made necessary legislative changes in the Finance Act, 2014, by amending section 285BA of the Income-tax Act, 1961, the Finance Ministry release said.
On October 29, 2014 in Berlin, 51 countries/jurisdictions had joined the MCAA. Switzerland became the 52nd country to join the MCAA on November 19.
Ghana and Seychelles joined the MCAA on May 14, 2015. With six countries joining the MCAA today, the total number of countries/jurisdictions agreeing to exchange information automatically in accordance with MCAA has gone up to 60.
Ninety-four countries have committed to exchange information on an automatic basis from 2017 as per the new global standards on automatic exchange of information, known as Common Reporting Standards (CRS) on Automatic Exchange of Information (AEOI).
The new global standards are very wide in scope and oblige the treaty partners to exchange wide range of financial information after collecting the same from financial institutions in their country/jurisdictions including information about the ultimate controlling persons and beneficial owners of entities, the release said.
