Now Reading: SEBI tightens KYC rules, orders FATCA and CRS upgrades
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SEBI tightens KYC rules, orders FATCA and CRS upgrades
The Story in Brief
SEBI has directed financial intermediaries to upgrade their KYC and tax reporting systems to comply with revised international tax disclosure rules under FATCA and CRS. A circular issued on 11 November requires Reporting Financial Institutions (RFIs) to update customer onboarding, verification, and reporting processes following the Income-Tax Act, 2025 and Income-Tax Rules, 2026, which took effect from 1 April 2026. The new framework is governed by Section 508 of the Act, Rules 238 to 240, and Form 166.
Intermediaries must revise self-certification procedures to capture additional validity indicators and identify controlling persons such as settlors, trustees, and beneficiaries. Firms must modify account classification systems to distinguish existing from new accounts and upgrade their Form 166 XML generation software for newly mandatory fields. SEBI warned that incomplete information could cause validation errors on the income tax portal and clarified that compliance responsibility rests entirely with the intermediaries, not with KYC Registration Agencies.
Indian Opinion Analysis
SEBI's November 11 circular transfers a significant compliance burden onto financial intermediaries, who must now overhaul KYC workflows, software, and certification procedures to meet the Income-Tax Act, 2025 and new FATCA/CRS standards. The regulator places full liability for accurate data on the firms themselves, not on the KRAs where certifications are uploaded. Firms face validation errors if their Form 166 XML generators lack the newly mandatory fields, creating a risk of submission failures on the income tax portal. The next step for every RFI is to identify gaps in their current self-certification, account classification, and XML generation systems before the next reporting cycle.
Source: freepressjournal.in
This brief was synthesised by AI from the source linked above. Methodology and corrections.
