Reporting Activities of Liaison Offices in India

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Mar. 5 – Overseas companies, organizations or an association of individuals are not required to file income returns with regards to liaison offices (LOs) on the grounds that such business is not permitted to be carried out in India. In order to question the basic information of non-resident entities with respect to the kind of activities conducted by their liaison offices, the Indian Government initiated Section 285 to the Income Tax Act in the Union Budget 2011. As per this section, non-resident entities having liaison offices in India are obligated to submit a prescribed annual statement to the tax authorities in respect to their activities within 60 days from the end of the financial year.

This particular section (Section 285) was made effective from June 1, 2011, but the form was not notified by the board. As such, the CBDT has recently notified the form by introducing Rule 114DA and Form No. 49C to the Income Tax Rules (1962). The yearly statement shall be duly verified by the Chartered Accountant or the Authorized Signatory of the non-resident entity. Additionally, according to the rule, the yearly statement in Form 49C shall be furnished in electronic form along with a digital signature. The rules and form shall come into force from April 1, 2012.

Example of form 49C:

Annual Statement under Section 285 of the Income Tax Act (1961)

  1. Financial year for which the statement is being submitted
  2. Name and principal address of the non- resident person in India
  3. Head office address of the non-resident person
  4. Permanent account number (if allotted)
  5. Tax identification number, if any, of country of incorporation or residence
  6. LO registration number granted by RBI
  7. Nature of activities undertaken by LO
  8. Date of opening of LO in India
  9. Date of RBI approval for LO opening
  10. Address of LO/LOs in India
  11. Date of submitting annual activity certificate (AAC) for the financial year to RBI
  12. Name, address and membership number of the chartered accountant signing the AAC as prescribed by the RBI
  13. India-specific financial details for the financial year i.e., receipts, income and expenses of the non-resident person from or in India (not only of the LO)
  14. Details of all purchases, sales of material, and services from/to Indian parties during the year by the non-resident person (not limited to transactions made by (LO)
  15. Name and designation of officer in charge for each office of the non-resident person in India
  16. Details of any salary or compensation of any sort payable outside India to any employee working in India or for services rendered in India
  17. Total number of employees working in the LO/LOs during the year. Particulars of employees drawing salary of Rs.50,000 or above per month specifying their name, designation, and position
  18. Details (with complete addresses including PAN) of agents/representative/distributors of the non-resident person in India.
  19. Names and addresses of the top five parties in India with whom the LO has been doing the liaising
  20. Details of products or services for which liaison activity is done by the LO
  21. Details of any other entity (including PAN, if any) for which liaison activity is done by the LO
  22. Details of group entities (with addresses and PAN, if any) present in India as branch office/companies/LLPs etc., incorporated in India and the nature of their business activities
  23. Details (with addresses) of other LOs of the group entities in India
  24. Other group entities operating from the same premises as the office of the LO

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