Companies and individuals who wish to send funds overseas will have to disclose it to the Income-Tax authorities from July this year, according to a change in tax rules carried out by the Central Board of Direct Taxes.
The new provision will allow tax authorities to keep a tab on remittances and act in time, if they find money being sent out without paying due taxes. The apex direct taxes body has notified new rules as per which post July 1, 2009, details are to be furnished electronically to a dedicated website for the purpose before effecting a remittance.
Subsequently, a signed printout is to be submitted to the tax authorities. This requirement is applicable even if tax is not required to be deducted at source. The move has been prompted by the thinking within the tax authorities that tax could be escaping their eye with increase in remittances.
At present, a remitter is required to furnish an undertaking to tax authority accompanied by a certificate from a chartered accountant. But, these documents are submitted to bank through which remittance is effected, who in turns forwards it to the tax authorities. The increase in remittances has made manual handling and tracking of certificates difficult, leading to time lag and thereby preventing prompt action by the tax authorities.
The introduction of e-filing of information... is with the objective of tracking information on remittances to recipients so that tax recovery can be expedited, a recent CBDT communiqu said.
Tax experts opine that the tax authorities are clearly looking at an early response. It is obvious that the I-T department considers payments to non-residents as a critical area. However, it remains to be seen how effectively and judiciously they are able to act on the data so collected, Amitabh Singh, partner, Ernst & Young said.
Details such as permanent account number, address of the recipient with the country of residence, his status, his principal place of business, e-mail address will have to be mentioned in the new e-form alongwith the tax deduction certificate from chartered accountant.