India can now seek banking related information from Cayman Islands for tax administration purposes. This is possible with the tax information exchange agreement (TIEA) entered with that jurisdiction becoming operational.
The Centre has directed the income-tax department to immediately give effect to all the provisions of the TIEA entered with Cayman Islands, which is better known as a tax haven. For this purpose, an executive order has been issued by the income-tax department in the last week of December, official sources said. India had signed a TIEA with Cayman Islands in March last year. This agreement had come into force in November 2011. So far TIEAs have been signed with seven jurisdictions – Bahamas, Bermuda, British Virgin Islands, Isle of Man, Cayman Islands, Jersey and Liberia. All the pacts except those with Liberia and Jersey have come into force.
India has also embarked on the process of renegotiating its existing double tax avoidance agreement (DTAA), with special focus on having clauses for exchange of banking information. Currently, India has DTAAs with 81 countries. As many as 75 of the 81 DTAAs do not have specific paragraph for exchange of banking information. All these 75 DTAAs have been picked up for renegotiation. The Finance Ministry is confident that the spate of TIEAs entered into by India and the DTAAs being renegotiated will pay rich dividends (higher revenue mop up) in the next five years through efficient exchange of information.