Mandatory submission of Information prior to remitting an amount to non-resident

Finance Act, 2008 has inserted a new provision as Sub Section (6) to Section 195 of the Income Tax Act, 1961 to make it mandatory for all the person making payment referred in section 195(1) on which withholding tax is required to be deducted to furnish information.

Now Rule 37BB has been inserted vide Notification No. 30/2009 dated 25/3/2009 to prescribe the forms and manner in which information u/s 195(6) is to be furnished.

Prescribed Forms:

Form 15CA: Information to be furnished under sub-section (6) of Section 195 of the Income-tax Act, 1961 relating to remittance of payments to a non-resident or to a foreign company. [Rule 37BB] [Word Document]

Form 15CB : Certificate of an accountant - relating to remittance of payments to a non-resident or to a foreign company. [Rule 37BB] [Word Document]

Manner of furnishing Information:

The information is to be furnished prior to remitting the amount in form 15CA and certificate from a chartered accountant to be obtained.

Information shall be submitted in electronic form first and than a singed copy of printout shall be submitted.

Further, para number 34 of circular no. 1/2009 dated 27/3/2009 explains the provisions as under:

34. Provision for furnishing of information regarding deduction of tax at source under section 195

34.1 Sub-section (1) of section 195 requires any person responsible for paying any interest or any other sum chargeable to tax (except dividends and income under the head "salaries") to a non-resident or to a foreign company, to deduct tax at source at the rates in force. Currently, the person making the remittance is required to furnish an undertaking (in duplicate) addressed to the Assessing Officer accompanied by a certificate from an Accountant in a specified format. This undertaking and certificate is submitted to the Reserve Bank of India or its authorized dealers who in turn are required to forward a copy to the Assessing Officer. The purpose of the undertaking and the certificate is to collect taxes at the stage when the remittance is made as it may not be possible to recover the tax at a later stage from the non-residents. There has been substantial increase in foreign remittances, making the manual handling and tracking of certificates difficult.

34.2 To monitor and track transactions in a timely manner, it is proposed to introduce e-filing of the information in the certificate and undertaking and accordingly section 195 of the Income-tax Act has been amended providing that any person responsible for paying any interest or any other sum chargeable to tax to a non-resident shall furnish the information relating to payment of such sum in such form and manner as may be prescribed by the Board.

34.3 Applicability: This amendment has been made applicable with effect from 1^st April, 2008.