Customer deposits held in Swiss banks not necessarily located in Switzerland: Swiss authorities tell FinMin

Swiss authorities have conveyed to the finance ministry that customer deposits held in Swiss banks are not necessarily located in Switzerland and also include deposits at their foreign branches, Minister of State for Finance Pankaj Chaudhary said on Tuesday.

As per the latest data from the Swiss National Bank (SNB), funds parked by Indian individuals and firms in Swiss banks, including through India-based branches and other financial institutions, jumped to a 13-year high of 2.55 billion Swiss francs (over Rs 20,700 crore) in 2020.

In reply to a written question in Rajya Sabha, Chaudhary said in respect of recent media reports, the Swiss authorities have recently, inter-alia, conveyed that SNB report provides a comprehensive picture of the Swiss banking sector and is based on the SNB's annual banking statistics.

Last month, the finance ministry had sought details from the Swiss authorities on the relevant facts along with their view on possible reasons for changes in funds parked by Indian individuals and entities in 2020.

"For these statistics, reporting banks provide balance sheet data on their bank office entity as well as on their foreign branches. Further, the Swiss Authorities have also conveyed that customer deposits held with Swiss banks are not necessarily located in Switzerland. Thus, the SNB annual banking statistics should not be used for analysing deposits held in Switzerland by residents of India," Chaudhary said.

Quoting SNB data, PTI, on June 17, reported that funds parked by Indian individuals and firms in Swiss banks, including through India-based branches and other financial institutions, jumped to a 13-year high of 2.55 billion Swiss francs (over Rs 20,700 crore) in 2020 on a sharp surge in holdings via securities and similar instruments, though customer deposits fell.

Following the report, the finance ministry in a statement had said the Swiss authorities have been requested to provide the relevant facts along with their view on possible reasons.

An automatic exchange of information in tax matters between Switzerland and India has been in force since 2018. Under this framework, detailed financial information on all Indian residents having accounts with Swiss financial institutions since 2018 was provided for the first time to Indian tax authorities in September 2019 and this is to be followed every year.

"India is engaging proactively with Switzerland to obtain information in relevant cases under the Double Taxation Avoidance Agreement (DTAA) between India and Switzerland.

"Further, India and Switzerland are signatories to the Multilateral Convention on Mutual Administrative Assistance in Tax Matters and both countries have also signed the Multilateral Competent Authority Agreement pursuant to which Automatic Exchange of Information is activated between the two countries for sharing of financial account information under Common Reporting Standard (CRS) annually," Chaudhary said.

As per SNB data, the increase in aggregate funds of Indian clients with Swiss banks from 899 million Swiss francs (Rs 6,625 crore) at the end of 2019, reverses a two-year declining trend and has taken the figure to 2.55 billion Swiss francs in 2020.

While the funds classified as "customer account deposits" have actually declined from CHF 550 million at the end of 2019 and those through fiduciaries also more than halved from CHF 7.4 million, the money held via other banks rose sharply from CHF 88 million in this period.

In the written reply, Chaudhary said the "Black Money (Undisclosed Foreign Income and Assets) and Imposition of Tax Act, 2015" was enacted with effect from July 1, 2015, to specifically and more effectively deal with the issue of black money stashed away abroad.

In the last three financial years, 166 assessment orders were passed, Rs 8,216 crore demand raised and prosecutions launched in 104 cases under the Act.