Automatic route for ECBs operationalised

NEW DELHI, SEPTEMBER 1: The government on Friday decided to operationalise the automatic route for external commercial borrowing ECB app...

NEW DELHI, SEPTEMBER 1: The government on Friday decided to operationalise the automatic route for external commercial borrowing ECB approvals up to 50 million and refinancing of the existing ECBs. The government also issued notification regarding the statements to be furnished by a venture capital company/fund, UTI and Mutual Funds to the income tax authorities. For this, the government has inserted Rule 12C and Form No 64 in the Income-Tax Rules, 1962.

Further, in keeping with the recent promises of the Prime Minister, the government has also decided to reduce the basic customs duty on certain items in the telecom and SSI sector, besides notifying excise duty exemption limit upto Rs 1 crore for SSI units.

Under the automatic route arrangement for ECBs, any corporate, being a legal entity and registered under the Companies Act, Socities Registration Act, Cooperative Socities Act, including proprietorship/partnership concerns, will henceforth, be eligible to enter into a loan agreement with overseas lenders for raising fresh ECB for an amount upto 50 million or for refinancing an existing ECB provided it is in compliance with the ECB guidelines framed by the Ministry of Finance and directions issued by the Reserve Bank of India.

Corporates will have to submit through an authorised dealer of their choice three copies of the loan agreement to the concerned Regional office of RBI after signing the same with the lender.

According to an official release, the Regional Office of the RBI would acknowledge the receipt of the copies of the agreement and would allot a loan identification number to the agreement. The primary responsibility to ensure that the ECBs raised are in conformity with the guidelines and RBI regulations would be that of the corporates.

Meanwhile, Central Board of Direct Taxes CBDT issued notification regarding the statement to be furnished by a Venture Capital Company VCC, Venture Capital Fund VCF UTI and mutual funds to the prescribed income tax authorities.

In this regard, notification dated August 29,2000 has been issued inserting Rule 12C and Form No. 64 in the Income-Tax Rules, 1962 with respect to statement to be furnished by the VCC or VCF to the prescribed income-tax authority.

Story continues below this ad

As per provisions of Finance Act 2000, VCC or VCF has been given a pass through status and the income received by them from Venture Capital Undertaking VCU will be taxed in the hands of the investor.

Accordingly, a provision has been made in the Finance Act 2000 that the person responsible for making payment of the income on behalf of a vcc or a vcf to the investor will be required to furnish a statement to the prescribed income-tax authority.

Through the above-mentioned notification, it has been specified that the statement should be furnished by November 30 of the financial year following the previous year in which the income was distributed.

This should be furnished in Form no. 64 giving details of name and address of VCC or VCF and its directors trustees and details of income received from investments in VCUs under various heads.