Norms On Current Account Remittances Eased
Foreign remittances under the current account of balance of payments will no longer require prior clearance from the Central Board of Direct Taxes, the government announced yesterday on the eve of its meeting with industrialists.
A notification which will be effective from today, will be issued by the revenue department to the income tax collectorates decreeing the change.
The changes have been effected consequent to the demand from scores of companies and industry organisations seeking a relaxation in the norms.
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Foreign investors, particularly from Germany, had complained about this procedural hurdle during finance minister P Chidambarams recent visit to Germany.
According to top finance ministry officials, this change would bring down the transaction time on foreign remittances drastically from the currently prevailing six to nine months.The volume of such remittances is estimated to be over Rs 2,000 crore in a year.
The biggest beneficiaries of this policy change are expected to be the new foreign joint venture partners and banks.
The no-objection certificate detracts from the automacity of current account convertibility the official said.
The idea of a no-objection certificate had been mooted by the Reserve Bank of India as part of its foreign exchange regulation. It was procedural and not required under the Income Tax Act.
Henceforth, individuals and companies will be taken at trust. They will have to fill up a self-declaration form and accompany it with a certificate from a chartered accountant, the official said.
The revenue department would, however, come down heavily on any misuse of the facility, officials said Official sources said however there would be random checks and those found in breach of trust would be prosecuted.
According to them, in such cases, the party would have to pay the required tax, penal interest and would also be subjected to prosecution.
The change would pertain to several current account transactions under the following heads: import of design and drawing royalty on books and software imports remittances of royalty and technical know-how fees; remittances of profits by foreign banks and companies; remittances of dividend and interest; remittances of winding-up proceeds. remittances as charges for hiring foreign consultants.