Bank Accounts To Be Blocked If Not Self – Certified Before April 30: All You Need To Know

The Income Tax Department of India has said that all bank account holders who opened their accounts between July 1, 2014, and August 31, 2015, need to provide self-certification of compliance under Foreign Account Tax Compliance Act (FATCA) by April 30, 2017, or else their accounts will be blocked.

The announcement which came on Tuesday was a step taken to comply with FATCA – a pact signed between India and the US. It was signed in 2015 and allows both countries to share data on tax evaders.

Account owners will have to submit Know Your Customer (KYC) and Aadhaar details to the banks. It is a move which will enable Aadhaar links to all accounts (government’s aim for digital India) to honour the pact with the US as well.

The Tax department said in a statement, “The account holders may be informed that, in case self-certifications are not provided till April 30, 2017, the accounts would be blocked, which would mean that the financial institution would prohibit the account holder from effecting any transaction with respect to such accounts,”.

Here are a few more things about this recent development:

• India entered into an agreement with the US for the implementation of FATCA with effect from August 31, 2015.
• Earlier, financial institutions had to obtain self-certification from account holders by August 31, 2016, with regard to all accounts opened from July 1, 2014-August 31, 2015.
• Keeping in mind the difficulties faced by the stakeholders, the tax department had to extend the deadlines.
• It’s not just savings account and current accounts; mutual funds and other financial institutions have asked their customers to comply with the rule as well.
• If account holders fail to self-certify within the stipulated timeline, banks will block their accounts and no transaction can take place.
• However, once customers self-certify and verification is complete, account holders will get back access to the blocked account.

Tax evasion is a serious crime and should be nipped in the bud. The move is aimed to improve data sharing so that tax evasion becomes harder. Make sure you provide your Aadhaar and KYC details before April 30.

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A Handy Guide To Bank Accounts in India

A bank account is a financial account offered as a service by banks to the public to deposit money for savings, business, and investment purposes. In India, there are four types of bank accounts which are most popular and used by all.

Savings Bank Accounts:

This is one of India’s most popular accounts. As the same suggests, the aim of savings account is to encourage a savings habit among the public. These accounts can only be opened in the name of individuals.

When one opens such an account, the owner of the account is presented with a passbook, an ATM card, and a chequebook. There are a few restrictions on the amount of transactions that can be done per day on these accounts.

One of the most attractive features of such an account is the interest earned on the money in the account. The rate of interest differs from bank to bank.  The Reserve Bank of India (RBI) till 2011 regulated the rate of interest given by banks. However, after October 2011, the RBI deregulated the interest rates and banks were given freedom to decide on the interest rate. This has led to a completion among many banks from some offering 4% to some going up to 6-7%.

When opening such accounts, one has to enquire about minimum balance. Some banks require the account holder to always have a minimum balance in the account, but the RBI has stated that banks are required to provide zero balance accounts where if the minimum balance reaches zero, you won’t be levied a fine by the bank.

Current Account:

Such an account is meant for businesses and business related transactions. These accounts can be opened under the name of a firm or a company. They are opened to business conduct their transactions in a smooth manner.

A chequebook facility is given to all account holders. Current accounts, unlike savings accounts, do not have a restriction on the number of withdrawals or deposit or usage of cheques. Banks do not pay interest on such accounts. However, in recent times, some banks have introduced special current accounts where interest is paid according to the bank’s own criteria.

There is a minimum balance requirement when it comes to current accounts. Most banks require the minimum balance to be INR 5,000 or INR 10,000.

Recurring Deposit Account:

A Recurring Deposit or RD as they are popularly known are for people who can deposit a small amount of money every month and want to earn a decent interest on it.

These accounts can be opened under single or joint names. Under such accounts, a person deposits a fixed sum of money every month, the amount has to be deposited every month without fail, a default attracts a penalty. However, certain banks allow variable payments where the deposit amount can vary, the account holder can deposit higher amounts too up to a certain upper limit.

The maturity period ranges from six months to 10 years. A default in monthly payments reduces the interest earned. Premature withdrawal of the account balance is allowed, however, you need to pay a penalty for it. The account holder is given a passbook to keep a check on the balance and interest earned. The people who open an RD are often those who intend to save money for a particular goal. (Children’s education, marriage, car etc.)

Fixed Deposit Accounts:    

They are popularly known as FD accounts. They are mainly used by people who want to deposit a lump sum amount of money for a certain period of time and earn interest on it. The maturity period ranges from seven months to 10 years.

The rate of interest is high on FDs which attracts a lot of people. It’s a great investment tool and very popular across India. Account holders are permitted to withdraw the amount before maturity, it will attract a penalty, though. Account holders have the option of directing the interest paid to be deposited into their savings account or current account.

Today, many banks have developed new accounts keeping in mind the needs of the people. However, most people still use the above-mentioned bank accounts and look for banks which offer these services with minimum documentation and attractive interest rates. Banks like Axis Bank are a good bet, they are known for good customer services and great offers.