query under FEMA, IncomeTax Act
Querist :
Anonymous
(Querist) 23 December 2010
This query is : Resolved
Our company hired a UK foreign national for a consultancy work. He has been paid fees after dedcuting TDS. What are the procedural requirements in FEMA, Income Tax Act etc.
Pl. reply at the earliest, since its urgent.
Thanks & regards,
Dinesh
malipeddi jaggarao
(Expert) 23 December 2010
FEMA Regulations:
Import trade is regulated by the DGFT. The AD (Bank which makes payment for Import) should ensure that their constituents import goods in to India in conformity with the Foreign Trade Policy announced by the commerce ministry, which is effective for the year 2009-14.
As regards imports from Nepal and Bhutan, Exchange Control allows free transfers of INR to the a/cs of Nepal and Bhutan residents without RBI permission. Rupee a/cs of Nepalese and Bhutanese residents are treated as resident a/cs as per FEMA.
Because of this reason, sale of foreign exchange is prohibited for import of goods from Nepal and Bhutan in to India.
Import Licenses- Authorised Dealers(normally banks who are permitted to undertake foreign exchange business including exports and imports) should not open L/Cs or make remittances on behalf of the importers for import made of goods on the negative list as per Foreign Trade Policy without submitting Exchange Control Copy of the import licence.
Importer should utilise the foreign exchange for the purpose for which it was drawn.
When exchange has been released for import of goods in to India, the A.D.(Bank which released the foreign currency for import payment) should ensure that the importer submits documents evidencing import of goods.
Form A 1— The importer should make an Application to the authorised dealer on Form-A1for drawal of foreign exchange for import giving details thereof for amount exceeding USD.500.00.
Advance remittance may be made for import of goods/services without any ceiling subject to the following:
(a) The importer should hold E. C. copy of licence if the goods to be imported are on negative list.
(b) Advance remittance should be made directly to the supplier.
(c) Physical import of goods in India should be ensured within three months from the date of remittance and evidence of import should be received within 15 days thereof.
(d) In case of non-import of goods, the amount remitted, as advance remittance should be got repatriated immediately or utilised for the permissible purpose.
Settlement of import payment should be made within six months from the date of shipment except in cases where amounts are withheld towards performance guarantee.
However, if it is delayed due to genuine difficulty of the importer, the remittance may be allowed even after six months with or without payment of interest for the delay.
Deferred payment arrangements including payments beyond a period of 6 months from the date of shipment up to less than 3 years are treated as trade credits
Evidence of import: It is obligatory on the part of importer and the Bank who releases the foreign currency to get evidence of import for imports exceeding USD.1.00 lakh in the following manner –
Exchange Control Copy of Bill of Entry for home consumption or
b) For units in 100% EOU the EC copy of B/E for warehousing or
c) Custom Assessment Certificate or Postal Appraisal Form as declared by the importer to Custom Authorities for imports by post.
d) In case of imports in non-physical form, CA’s certificate
In all cases of import, it is obligatory on the part of importer/currency releasing Bank (A.D.) to ensure submission of evidence of import by the importer i.e. Bill of Entry within 3 months from the date of remittance for import involving foreign exchange exceeding USD 1, 00,000.00.
On June 16, 2005, an amendment was made to Chapter V Service Tax in the Finance Act, 1994 by which an Explanation was added below section 65(105), to provide that if a service is provided by a person who does not have permanent residence in India, to a person having permanent residence in India it is deemed to be a ‘taxable service’. Section 66A was inserted in the Finance Act, 1994 with effect from April 18, 2006 to provide for ‘Charge of service tax on services received from outside India’.
A V Vishal
(Expert) 23 December 2010
There are no requirements in FEMA and since the tax is deducted and deposited in to the government a/c, submit 15CA to the Bank and obtain a certificate from your auditor in 15CB.
