The Reserve Bank of India has exempted regional rural banks with assets of less than US$175 million from the US Foreign Account Tax Compliance Act (FATCA).
Regional rural banks, taken together with related entities, with assets of below US$500 million are also not required to register with the American tax authorities - the US Internal Revenue Service (IRS) - under FATCA, said the central bank.
Regional rural banks that do not meet either criterion, however, are required to register with the US IRS, obtain a Global Intermediary Identification Number (GIIN), and comply with FATCA. They will then be able to accept deposits from non-resident Indians.
FATCA is an anti-tax evasion law that requires foreign banks, investment funds and insurance companies to report offshore accounts of Americans worth more than US$50,000 to the US IRS. Firms that fail to comply will face a 30 percent withholding tax on their US investment income and could be frozen out of US capital markets.