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Submission of No Objection Certificate in case of remittance to a non-resident

1. Circular No. 759 dated 18-11-1997 was issued by the Board to dispense with the requirement of submission of a No Objection Certificate from income-tax authorities for remittance to a non-resident as required by the Reserve Bank of India (RBI). In paragraph 2 of the said Circular, it was stated that henceforth remittances may be allowed by the RBI without insisting upon a No Objection certificate from the Income-tax Department provided the person making the remittance furnished an undertaking in dupli­cate addressed to the Assessing Officer which was accompanied by a certificate from an accountant other than an employee as defined in the Explanation below section 288 of the Income-tax Act, 1961 in the form annexed to the said Circular. The person making the remittance had to submit the undertaking along with the said certificate of the accountant to the RBI, who would, in turn forward a copy thereof to the Assessing Officer.

2. A number of references have been received by the Board stating that RBI had delegated powers to authorised dealers to allow certain types of remittances to non-residents without obtaining approval of RBI. In such cases, RBI cannot forward the undertak­ing and certificate of the accountant to the Assessing Officer as prescribed in Circular No. 759. The RBI has already issued a Circular – AD (MA Series) Circular No. 48, dated 29th November, 1997 (see Annex)  to all authorised dealers in foreign exchange directing them to forward a copy of the certificate together with a copy of the undertaking to the office of the Assessing Officer of the Income-tax Department as indicated in the undertaking. In view of the foregoing, it is clarified that Circular No. 759 would also be applicable to remittances made through authorised dealers in Foreign Exchange.

3. In accordance with Circular No. 759, the undertaking to be submitted by the person making the remittance to a non-resident is required to be signed by the person authorised to sign the return of income of the person making the payment. The person authorised to sign a return of income in the case of a company, in accordance with section 140 of the Income-tax Act, 1961 is the Managing Director and each undertaking for each remittance has, therefore, to be signed by the Managing Director. Representations pointing out administrative difficulties experienced by companies have been received. It has, therefore, been decided that the undertaking to be submitted at the time of making a remittance to a non-resident shall be signed by the person authorised to sign a return or a person so authorised by him in writing.

4. It is also clarified that Circular No. 759 will cover those remittances for which RBI had prescribed the production of a No Objection Certificate from the income-tax authorities under its Exchange Control Manual. Further, if an order under section 195(2) has been obtained by a person responsible for deducting tax, the new procedure of filing an undertaking along with a certificate prescribed in Circular No. 759 would not be applica­ble.

5. The contents of this Circular may be brought to the notice of all the officers working in your charge.

Circular : No. 767, dated 22-5-1998.

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