TDS on Remittances to Non-Residents: CBDT Format Mandatory for All Payments
Current · Source: Reserve Bank of India · RBI/2007-2008/100 · issued 19 Jul 2007 · ~2 min read
Quick answerRBI mandates that all foreign exchange remittances to non-residents, including trade payments, require an undertaking and Chartered Accountant's certificate in the CBDT-prescribed format under Section 195 of the Income Tax Act.
The rule, in the simplest words
Every time a bank sends money abroad to a non-resident (someone not living in India), the person sending the money must give the bank a special promise (undertaking) and a certificate from a Chartered Accountant (a licensed money expert).
This rule applies to ALL types of payments, even buying goods from other countries (import payments), not just interest payments.
The promise and certificate must follow the exact format given by the CBDT (India's tax authority) in their Circular No.10/2002.
If the bank does not get these papers, the bank might have trouble with tax deduction rules under Section 195 of the Income Tax Act.
How it plays out — a real example
A forex & trade-finance officer in Mumbai is processing a remittance for a customer who is paying a foreign supplier for gold bars. The officer remembers the new rule and asks the customer for the CBDT undertaking and CA certificate before sending the money, even though it's a trade payment. This ensures the bank follows the law and avoids any tax issues.
What changed
RBI clarified that the undertaking and CA certificate format from CBDT Circular No.10/2002 applies to all remittances to non-residents, not just interest payments. This includes import payments and other trade transactions. The clarification was issued in response to queries from authorized dealers.
What it means for you
Banks must now ensure that every foreign exchange remittance to a non-resident, regardless of purpose, is accompanied by the prescribed undertaking and CA certificate. This increases compliance burden for both banks and remitters, as trade payments previously thought exempt are now covered. Non-compliance could lead to tax deduction issues under Section 195.
What you must do
Update internal remittance processing checklists to require the CBDT undertaking and CA certificate for all non-resident remittances, including import payments.
Train staff handling forex transactions to verify the format and completeness of the undertaking and certificate as per CBDT Circular No.10/2002.
Notify corporate and retail customers about the mandatory documentation for all outward remittances to non-residents.
Review existing remittance procedures to ensure compliance with Section 195 of the Income Tax Act and Rule 29B of IT Rules.
Who it affects
All Category-I Authorised Dealer banks, Authorised banks handling forex remittances, Corporate and individual remitters making payments to non-residents, Chartered Accountants certifying remittance documents
❓ Common questions
Does this circular apply to remittances for import of goods?
Yes, the circular explicitly states that the undertaking and CA certificate are required for all remittances to non-residents, including trade transactions such as import payments.
What is the legal basis for this requirement?
The requirement stems from Section 195 of the Income Tax Act read with Rule 29B of the IT Rules, which mandates tax deduction at source on payments to non-residents. The circular is issued under FEMA, 1999.
What happens if a remitter fails to submit the undertaking and certificate?
The authorized dealer should not process the remittance without the prescribed documents, as non-compliance could lead to tax liability issues under Section 195.
📜 Read the original circular — full text as issued by RBI
RBI/2007-2008/100
A. P. (DIR Series) Circular No. 03
July 19, 2007
To,
All Category - I Authorised Dealer banks and Authorised banks
Madam / Sir,
Remittances to non-residents - Deduction of tax at source
Attention of Authorised Dealer Category - I (AD Category - I) banks and authorised banks is invited to A. P. (DIR Series) Circular No.56 dated November 26, 2002 enclosing a copy of Central Board of Direct Taxes (CBDT) Circular No.10/2002 dated October 9, 2002 (F.No.500/152/96-FTD) regarding revision in the format of the undertaking and the certificate to be submitted by the remitter at the time of making remittances to non-residents.
2. We have been receiving queries from authorised dealers whether such undertaking and certificate should be obtained in all cases of remittances in foreign currency to non-residents including remittances for trade payments. On the basis of the communication received from CBDT, Department of Revenue, Ministry of Finance, Government of India, it is clarified that under Section 195 of the Income Tax Act read with Rule 29B of the IT Rules, any person responsible for making payment to a non-resident or to a foreign company, any interest or any other sum chargeable under the IT Act, shall at the time of payment or credit of the amount deduct Income Tax thereon at the rate in force. Section 195 of the IT Act is not limited to interest income and it takes into account business income also. Further, points 7 and 8 of the Chartered Accountant's certificate deals with remittances for supply of articles or things (plant, machinery, equipment, etc.) or computer software and business income, respectively.
3. Accordingly, a remitter of foreign exchange is required to submit to the authorised dealer, an undertaking and Chartered Accountant’s certificate in the format prescribed by CBDT vide circular No. 10/2002 dated October 9, 2002 at the time of making the remittance in foreign exchange to non-residents including remittances which are in the nature of trade transactions such as import payments.
4. AD Category - I banks and authorised banks may bring the contents of this circular to the notice of their customers and constituents concerned.
5. The directions contained in this circular have been issued under Section 10 (4) and Section 11 (1) of the Foreign Exchange Management Act, 1999 (42 of 1999) and is without prejudice to permissions / approvals, if any, required under any other law..
Yours faithfully,
(Salim Gangadharan)
Chief General Manager
Reproduced for reference with acknowledgment — Source: Reserve Bank of India · RBI/2007-2008/100 · issued 19 Jul 2007. The plain-English explanation above is BankPulse’s own independent summary.
Example: if you are a Compliance officer at a bank this circular applies to (All Category-I Authorised Dealer banks, Authorised banks handling forex remittances, Corporate and individual remitters making payments to non-residents, Chartered Accountants certifying remittance documents), your first concrete step on “TDS on Remittances to Non-Residents: CBDT Format Mandatory for All Payments” is: “Update internal remittance processing checklists to require the CBDT undertaking and CA certificate for all non-resident remittances, including import payments.” (RBI issued this 19 Jul 2007).
Circular: RBI/2007-2008/100 -- TDS on Remittances to Non-Residents: CBDT Format Mandatory for All Payments
Issued: 19 Jul 2007
Action required: Update internal remittance processing checklists to require the CBDT undertaking and CA certificate for all non-resident remittances, including import payments.
Action required: Train staff handling forex transactions to verify the format and completeness of the undertaking and certificate as per CBDT Circular No.10/2002.
Action required: Notify corporate and retail customers about the mandatory documentation for all outward remittances to non-residents.
Action required: Review existing remittance procedures to ensure compliance with Section 195 of the Income Tax Act and Rule 29B of IT Rules.
Owner: ____________ Target date: ____________
Board/committee approval needed? Y / N
Evidence filed in compliance register on: ____________
Built only from this circular’s own published fields — not legal advice; always confirm against the official RBI source.
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BankPulse Compliance Evidence Pack — generated 05 Aug 2026 · status cross-checked against RBI’s official withdrawal register (refreshed weekly). Official RBI source: https://www.rbi.org.in/Scripts/NotificationUser.aspx?Id=3727&Mode=0 — Plain-English summary by BankPulse (bankpulse.ai), reviewed by our expert reviewer, CA Amit Jain. Independent platform, not affiliated with the Reserve Bank of India; is our own plain-English paraphrase, not RBI’s original wording.
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