Deduction of Tax at Source in the case of Non-Residents and No Objection Certificate for Foreign Remittance ( Sec. 195 )

1. Any person responsible for paying to a non-resident, not being a company, or to a foreign company, any interest (not being interest on securities) or any other sum chargeable under the provisions of this Act (not being income chargeable under the head "Salaries" ) shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, deduct income-tax thereon at the rates in force:
   Provided that in the case of interest payable by the Government or a public sector bank within the meaning of clause (23D) of section 10 or a public financial institution within the meaning of that clause, deduction of tax shall be made only at the time of payment thereof in cash or by the issue of a cheque or draft or by any other mode.
   
   
2. Where the person responsible for paying any such sum chargeable under this Act (other than interest on securities and salary) to a non-resident considers that the whole of such sum would not be income chargeable in the case of the recipient, he may make an application to the Assessing Officer to determine, by general or special order, the appropriate proportion of such sum so chargeable, and upon such determination, tax shall be deducted under sub-section (1) only on that proportion of the sum which is so chargeable.
   
   
3. Subject to rules made under sub-section (5) of Sec.195 , any person entitled to receive any interest or other sum on which income-tax has to be deducted under sub-section (1) may made an application in the prescribed form to the Assessing Officer for the grand of a certificate authorising him to receive such interest or other sum without deduction of tax under that sub-section, and where any such certificate is granted, every person responsible for paying such interest or other sum to the person to whom such certificate is granted shall, so long as the certificate is in force, make payment of such interest or other sum without deducting tax thereon under sub-section (1).
   
   
4. A certificate granted under sub-section (3) of Sec.195 shall remain in force till the expiry of the period specified therein or, if it is cancelled by the Assessing Officer before the expiry of such period, till such cancellation.

NEW PROVISIONS IN THE CASE OF NOCs

Circular No. 759, dated 18th November, 1997.

Subject : Remittance to a non-resident--Deduction of tax at source--Submission of No Objection Certificate--Dispensing with--Regardings.

To

All the Chief Commissioners of Income-tax,
Directors-General of Income-tax

Sir,

1. Section 195 of the Income-tax Act, 1961, provides that any person responsible for paying to a non-resident any sum chargeable under the Act shall, at the time of credit of such income to the account of the payee or at the time of payment thereof in cash or by cheque or draft or any other mode, whichever is earlier, deduct income-tax thereon at the rates in force.

2. The Reserve Bank of India have provided in their Office Manual that no remittance shall be allowed unless a No Objection Certificate has been obtained from the Income-tax Department. It has since been decided that henceforth remittances may be allowed by the Reserve Bank of India without insisting upon a No Objection Certificate from the Income-tax Department and on the person making the remittance furnishing an undertaking (in duplicate) addressed to the Assessing Officer 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 this circular. The person making the remittance shall submit the undertaking along with the said certificate of the accountant to the Reserve Bank of India, who in turn shall forward a copy thereof to the Assessing Officer.

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

Yours faithfully,

(Sd.)

Rajat Bansal,
Under Secretary (FTD).
[F. No. 500/152/96-FTD]

UNDERTAKING

To .............................................
(Designation of the Assessing Officer)
...............................
............ ..................

I/We ................................ (name, address and permanent account number) propose to make a remittance of ....................... (Amount) being ............................... (nature of payment) to ........................... (name and complete address of the person to whom the remittance has been made) after deducting a sum of Rs. ......................... being the tax at....................... , which is the appropriate rate of tax deductible at source on the said amount of remittance.

2. A certificate from the accountant as defined in the Explanation below section 288 of the Income-tax Act certifying the nature and amount of income, amount of tax payable and the amount actually paid, is also annexed.

3. In case it is found that the tax actually payable on the amount of remittance made has either not been paid or has not been paid full, I/we undertake to pay the said amount of tax along with interest found due in accordance with the provisions of the Income-tax Act.

4. I/we will also be subject to the provisions of penalty and prosecution for the said default as per the Income-tax Act.

5. I/we also undertake to submit the requisite documents etc., for enabling the Income-tax Department to determine the nature and amount of income and tax, interest, penalty etc., payable thereon.

Date :................

(Name and signature)

Place :................

(The undertaking shall be signed by the person authorised to sign the return of income of the person making the payment).

CERTIFICATE

I/we have examined the books of account of M/s............................ (name, address and permanent account number of person making the remittance) for ascertaining the nature of the remittance, of............... (amount of remittance) to .......................... (name and complete address of the person to whom the remittance is being made) and the rate at which the tax is deductible at source thereon and hereby certify that a sum of Rs...................... has been deducted as tax at the appropriate rate and has been paid to the credit of the Government.
Date :.............
Accountant
Place :...........

Assessing Officer for the purpose of issuing NOC for foriegn remittance are as follows:-