What changed
Previously, LOs/BOs only had to furnish the Annual Activity Certificate to the DGIT. Now, the AAC must be accompanied by audited financial statements including receipt and payment account. Additionally, AD banks must endorse a copy of each renewal of LO permission to the DGIT office.
What it means for you
Banks acting as AD Category-I must ensure their LO/BO clients submit complete documentation—AAC plus audited financials—to tax authorities. This tightens oversight and aligns FEMA reporting with income tax compliance. Non-compliance could lead to regulatory action.
What you must do
- Advise all LO/BO clients to attach audited financial statements (including receipt and payment account) with their Annual Activity Certificate when submitting to DGIT (International Taxation).
- At the time of renewing LO permissions, endorse a copy of the renewal to the office of DGIT (International Taxation).
- Update internal compliance checklists to verify that AAC submissions include the required audited financials before processing renewals.
- Communicate these requirements clearly to all concerned constituents and customers.
Who it affects
Authorised Dealer Category - I banks, Foreign entities operating Liaison Offices or Branch Offices in India, Income Tax authorities (DGIT International Taxation)
What documents must accompany the Annual Activity Certificate?
The AAC must be accompanied by audited financial statements, including a receipt and payment account.
Do AD banks need to do anything at the time of LO renewal?
Yes, AD banks must endorse a copy of each renewal of LO permission to the office of DGIT (International Taxation).
Under which legal provisions is this circular issued?
It is issued under Sections 10(4) and 11(1) of the Foreign Exchange Management Act, 1999.