In terms of Section 285 of the Income Tax Act, 1961, every non-resident who has a liaison office in India set up in accordance with the guidelines issued by the Reserve Bank of India under the Foreign Exchange Management Act, 1999 is obliged to prepare and deliver or cause to be delivered, a statement in respect of its activities in a financial year (“Annual Statement”) within sixty (60) days from the end of such financial year in the form and containing such particulars as may be prescribed. The Central Board of Direct Taxes (“CBDT”) has on February 6, 2012 prescribed such form and procedure to file the Annual Statement.
The CBDT has inserted a new Rule 114DA (“said rule”) in the Income Tax Rules, 1962 whereby the Annual Statement must be furnished in the newly prescribed Form No. 49C. The said rule also stipulates the following conditions for purposes of filing the Annual Statement:
1. The Annual Statement must be duly verified by an Authorized Signatory who may either be a Chartered Accountant or a person authorized in this behalf by the non-resident; and
2. The Annual Statement must be furnished in electronic form along with digital signature.
The Director General of Income Tax (Systems) shall specify the procedure for filing of the Annual Statement and be responsible for formulating and implementing appropriate security, archival and retrieval policies in relation to statements so supplied.
Apart from the general information required to be disclosed in such cases, Form No. 49C also requires information about, inter alia, India specific financial details for the financial year of the non-resident person, details of purchases, sales of materials and services to Indian parties during the year by the non-resident apart from the transactions made by the liaison office, number of employees working in the liaison office and details of any salary or compensation of any sort payable outside India to any employee working in India or providing services in India, details of products and services for which liaisoning activities are done and details of any other entity for which liaisoning activity is carried out.