Simplified procedure for remission of payments by way of royalty or fees for technical services to a foreign Co. - Income Tax - 1800/CBDT

INSTRUCTION NO. 1800/CBDT Dated: October 14, 1988 Under the existing procedure for remitting payments on amount of royalty or fees for technical services to foreign companies, taxpayers have to obtain a 'No Objection Certificate' from the Income-tax authorities before such remittance is allowed by the Reserve Bank of India. 2. With a view to simplifying this procedure it has been decided, that hereforth taxpayers will not be required to obtain a No Objection Certificate from the Income-tax authorities before remitting payments by way of royalty or fees for technical services to a foreign company under an approved agreement, if tax at the rate of 30% has been deducted from such payments and paid to the 'designated bank.' 3. Under the new procedure the remitter will furnish to the 'designated bank' details of payments in a prescribed form certified by a Chartered Accountant alongwith the Income-tax Challan of payment. All Public Sector Banks at District headquarters who are authorised to collect tax on behalf of the Income-tax Department will be the 'designated banks' for the purpose. On payment of tax by the remitter the designated banks will forward a certificate of such payment to the Reserve Bank of India. On receipt of this certificate, the Reserve Bank of India will permit the remittance without insisting on a No Objection Certificate from the Incometax authorities. 4. A copy of Reserve Bank of India's letter Refere a GA.NB.No. 593/G.A.64(10)J-88/89 dated 17.8.88 to the Banks concerned containing the guidelines to be followed by the 'designated banks' and the prescribed form for deduction of tax, is enclosed. Particular attention is invited to Paras 4,5 and 8 of the guidelines. 5. For the removal of doubts it is clarified that this procedure will apply only where the payment is by way of royalty or fees for technical services and is made to a foreign company under an approved agreement and tax has been deducted at the rate of 30% of the gross amount. For other types of payments, or where the remitter claims that the tax rate is lower than 30% under a Double Taxation Avoidance Agreement or otherwise, Reserve Bank of India will allow the remittance only after a No Objection Certificate from the Income-tax Authority concerned has been obtained. 6. It is requested that the contents of this Instruction may be brought to the notice of all the officers working in your charge.