Payment to a foreigner in foreign currency towards consultancy

Dear Members

Greetings!
I would like to know the possibility of making a payment to a Foregin
National (after entering into a written agreement) in Foregin currency
to his foreign bank account (the account is in UK) and he will be here
in india for a short period. During the period, he will explore his
expertise of a particular job. The amount is approx 4500 usd.

My question in this context, Is it permissible under FCRA?
If, it is not permissible under FCRA, can I make payment from Local Fund?

Kindly forgive me writing directly to you as I couldn’t find a link to
post questions on your website or blog.

Regards
Mathew Jose

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6 Responses to Payment to a foreigner in foreign currency towards consultancy

  1. rajeev says:

    Need to obtain 15CA/CB from your CA certifying the payment and deduction of applicable tax provided in normal situation of consultancy from abroad and you can use FCRA funds. when the person is visiting here and working work visa formalities are required remember even the students coming to see on some exchange program with a charitable organization in south were sent back.

  2. rajesh arya says:

    From the contents of your query it sounds that the foreign national is not working on a project, rather trying to build his capacity on a project without even an assurance that s/he will fit into a role.

    In my opinion, if you have an FCRA grant that allows you to utilize funds for overhead expenses of this nature, you can pay him after withholding TDS. Your CA can provide a certificate and you can advise your bankers for a wire transfer into his bank account.

    Just in case such a cost is not covered in the foreign funding agreements, you can pay from local funds using the same tax deduction and banking process.

  3. Subhash Mittal says:

    Hello Mathew,

    I presume you have entered into a consultancy contract with the concerned individual and the objective of the contract is in pursuance of objectives of your NGO and the activity envisaged in the contract mainly contributes to your objectives in India.

    If my above premise is correct, then there is no bar in your organisation entering into a contract with a foreign national and making payment in foreign currency. Payment in foreign currency is covered by by RBI through FEMA. It is covered by a RBI circular (Master Direction No. 8/2015-16). Basically you can make the payment without prior permission , but would need to give a declaration to your Banker, who will issue the foreign currency remittance. as far as RBI is concerned, you can make payment whether from FCRA or local funds. However as Shiva says, if the funds are being paid out of a grant, which is a FCRA grant, then it has to come out of FCRA funds and if it is for any other purpose, it can be made even out of your local account.

    Sorry your post has been put on blog for wider dissemination, hope you would not mind it.

    warm rgds

  4. Ajit Chaudhuri says:

    1. If the foreign national is here on a tourist visa, s/he cannot do paid work for you in the first place. If s/he is here on a work visa and is working for you as per a contract, you can pay into his/her local bank account.

    2. If you are an NGO with Section 12-A exemption, I doubt the IT laws would allow you to make a payment to a foreign bank account.

    Hope this helps!

  5. S.S.Shiva says:

    Dear Mathew Jose,
    If you have FCRA money, it would have come from a donor for a specific project. If the payment to the foreign national was also indicated as a part of the project and approved by the donor, may be you can make payment to him. Your FCRA money lying in your Indian bank account will be in the form of Indian currency only. How will you pay him in foreign currency? You may pay him from your FCRA account (if there is approval, as explained earlier), the equivalent amount of Indian currency. He can deposit in his foreign account and face the tax provisions. If it is not part of the project, then you can pay him from your local account and transferring that to his foreign account is his botheration.

  6. FCRA does not bar payment for services rendered in India. Taxes need to be deducted as per Indian laws. CA certificate needed to transfer funds through FCRA.

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