FATCA/CRS and the Indian Family with Global Assets

The Automatic Information Exchange Framework Most Families Don't Realise They're Inside

Two overlapping international frameworks now mean that a bank account, investment, or trust interest an Indian-resident family member holds in almost any major financial centre is very likely being automatically reported to Indian tax authorities, without the family needing to disclose it proactively for the information to reach India in the first place. This is a structural shift from the older assumption - still held by some families - that undisclosed foreign assets are simply a matter of whether the family chooses to report them. For accounts covered by these frameworks, that choice has, in a meaningful practical sense, already been made by the reporting financial institution.

FATCA: The US-Specific Framework

The Foreign Account Tax Compliance Act (FATCA), enacted by the United States, requires foreign financial institutions worldwide - including Indian banks and financial institutions - to identify and report accounts held by US persons (including US citizens and green card holders, regardless of where they live) to US tax authorities. India signed an Inter-Governmental Agreement (IGA) with the US, operationalised through Rules 114F to 114H of the Income-tax Rules, under which Indian financial institutions report specified account information to Indian tax authorities, who in turn exchange it with the US Internal Revenue Service - and, in the reverse direction, information about accounts held by Indian tax residents in US financial institutions flows back to India.

Where this catches Indian families off guard: a family member with US citizenship (including a child born in the US during a parent's work assignment there, who may hold US citizenship without the family fully registering the ongoing compliance implications) is treated as a "US person" for FATCA purposes for as long as they hold that citizenship, regardless of subsequent residence in India - meaning their global accounts, including Indian bank accounts, can trigger FATCA reporting obligations for the Indian institution holding those accounts, and their own US tax filing obligations continue independent of Indian residency.

CRS: The Broader, Multilateral Framework

The Common Reporting Standard (CRS), developed by the OECD and adopted by over 100 participating jurisdictions including India, extends the same basic logic globally rather than bilaterally with a single country: financial institutions in each participating jurisdiction identify account holders who are tax resident in another participating jurisdiction, and report those accounts to their own domestic tax authority, which then exchanges the information with the account holder's jurisdiction of tax residence. For an Indian-resident family, this means an account held in Singapore, the UAE, the UK, Switzerland, or any other CRS-participating jurisdiction is very likely being reported back to Indian tax authorities as a matter of routine institutional compliance - not as a result of any Indian investigation or request.

Where This Intersects Directly With Private Client Structures

Trusts and beneficial ownership. CRS reporting rules extend beyond simple account ownership to capture beneficial owners of entities and trusts holding reportable financial accounts - meaning a discretionary trust beneficiary, even one with no guaranteed or fixed entitlement, can be identified and reported as a "controlling person" or beneficial owner under CRS due-diligence rules, in much the same way beneficial trust interests are independently reportable under India's own Black Money Act framework. Families structuring offshore trusts on the assumption that a discretionary interest is inherently low-visibility are increasingly finding that assumption incorrect on two independent fronts - Indian domestic disclosure law, and now automatic international reporting under CRS.

Family offices and pooled investment vehicles. A family office or family investment entity holding accounts across multiple jurisdictions on behalf of various family members needs its own CRS classification and due-diligence process - determining whether the entity itself is a "financial institution" for CRS purposes (in which case it has its own reporting obligations to identify and report its underlying beneficial owners) or a "passive non-financial entity" (in which case the institutions holding its accounts must look through to identify and report its controlling persons) - a classification exercise many family offices have not undertaken rigorously, despite its direct bearing on what gets reported, by whom, and to which jurisdictions.

Mismatch between reported information and filed tax returns. Because CRS and FATCA information reaches Indian tax authorities independently of what a taxpayer discloses in their own return, a mismatch between a family member's Schedule FA (Foreign Assets) disclosure in their Indian tax return and the account information Indian authorities receive through CRS/FATCA channels is now a specific, automatable data-matching exercise for tax authorities, rather than something requiring an active audit or investigation to surface - raising the practical stakes of accurate, complete foreign asset disclosure considerably higher than in the pre-automatic-exchange era.

The Practical Advisory Position

• Map every family member's FATCA and CRS exposure independently - US citizenship or green card status (FATCA) and tax residency in any CRS-participating jurisdiction (CRS) each create independent reporting triggers, and a family member can be caught by both simultaneously.

• Treat discretionary trust beneficiary status as reportable under CRS, in addition to its independent reportability under India's Black Money Act framework, rather than assuming discretionary structures reduce visibility under either regime.

• Classify family offices and family investment vehicles for CRS purposes explicitly, since the classification determines the entity's own reporting obligations versus its underlying account-holding institutions' obligations - an unclassified or misclassified entity risks a reporting gap that surfaces as a compliance failure rather than protective ambiguity.

• Reconcile Schedule FA disclosures against known CRS/FATCA-reportable accounts proactively, treating any gap as an active compliance risk given the automated nature of the cross-border data matching now available to tax authorities, rather than a historical oversight likely to go unnoticed.

The Broader Point

FATCA and CRS have quietly but fundamentally changed the risk calculus around undisclosed foreign assets for Indian families - the question is no longer primarily whether a family chooses to disclose a foreign account, but whether the family's own disclosure matches what has already, automatically, been reported to Indian tax authorities by the foreign institution itself. For private client practice, the useful work has shifted correspondingly: from advising on disclosure as a discretionary choice, to auditing a family's structures against what international information exchange has almost certainly already surfaced.