Firms Free To Pay Consultancy Charges From Eefc Account

The Reserve Bank of India (RBI) has allowed corporates to pay consultancy fees and charges for technical and non-technical services provided by foreign companies out of their export entitlement in foreign currencies (EEFC) accounts, without prior approval.

The decision follows a representations to the central bank by banks and corporates, saying that such payments are trade or business-related transactions.

Earlier, approval had to be sought for consultancy payments from the RBI which reviewed the applications on a case-by-case basis.

A recent RBI circular authorised the relevant dealers to allow such payments out of the corporates EEFC accounts.

Banking industry sources see the RBI move as a continuation of the central banks efforts to minimise procedural difficulties in the existing system.

 

The Reserve Bank has, however, asked banks to allow such payments out of the EEFC accounts only after documents in support of payments, such as, invoice and bill from the foreign consultancy firm, are verified.

However, the applicants will have to produce a no objection certificate from the Income-Tax authorities.

An undertaking on compliance with the Research & Development Cess Act, 1987, for payment of cess and provisions of Companies Act, 1956, will also have to be submitted.