What is FATCA & Why do you need it?
FATCA (short for Foreign Account Tax Compliance Act) is a regulation created by the US Government to curb tax evasion by US citizens. Under this regulation, assets held by US citizens in other countries now have to be reported to the US government.
India has signed a reciprocal agreement with the US government to share such information about each others’ citizens. Therefore all financial institutions (such as mutual funds) have to identify the citizenship and tax status of their investors and provide the necessary information to the government.