A. P. (DIR Series) Circular No. 03
Category - I Authorised Dealer banks and Authorised banks
to non-residents - Deduction of tax at source
of Authorised Dealer Category - I (AD Category - I) banks and authorised banks
is invited to A. P. (DIR Series) Circular No.56 dated November 26, 2002 enclosing
a copy of Central Board of Direct Taxes (CBDT) Circular
No.10/2002 dated October 9, 2002 (F.No.500/152/96-FTD) regarding revision in the
format of the undertaking and the certificate to be submitted by the remitter
at the time of making remittances to non-residents.
We have been receiving queries from authorised dealers whether such undertaking
and certificate should be obtained in all cases of remittances in foreign currency
to non-residents including remittances for trade payments. On the basis of the
communication received from CBDT, Department of Revenue, Ministry of Finance,
Government of India, it is clarified that under Section 195 of the Income Tax
Act read with Rule 29B of the IT Rules, any person responsible for making payment
to a non-resident or to a foreign company, any interest or any other sum chargeable
under the IT Act, shall at the time of payment or credit of the amount deduct
Income Tax thereon at the rate in force. Section 195 of the IT Act is not limited
to interest income and it takes into account business income also. Further, points
7 and 8 of the Chartered Accountant's certificate deals with remittances for supply
of articles or things (plant, machinery, equipment, etc.) or computer software
and business income, respectively.
Accordingly, a remitter of foreign exchange is required to submit to the authorised
dealer, an undertaking and Chartered Accountant’s certificate in the format prescribed
by CBDT vide circular No. 10/2002 dated October 9, 2002 at the time of making
the remittance in foreign exchange to non-residents including remittances which
are in the nature of trade transactions such as import payments.
AD Category - I banks and authorised banks may bring the contents of this circular
to the notice of their customers and constituents concerned.
The directions contained in this circular have been issued under Section 10 (4)
and Section 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and
is without prejudice to permissions / approvals, if any, required under any other
Chief General Manager