There has been substantially increase in foreign remittance since when ecommerce activities and import of goods and services are taking place in huge numbers. Any person making payment to non-resident is liable to deduct tax at source from the payment. The liability is cast on the shoulder of the payer because tax can easily be collected at the time of making payment, but it is not possible to collect tax at a later stage.
Section 195 of the income tax act mandates deduction of income tax from the payment made to non-resident. As per the act a person making payment is required to submit declaration in Form No. 15CA. There are cases where certificate from chartered accountant in Form 15CB is to be taken. Form 15CA and Form 15CB is required to be submitted to the reserve bank of India or the authorised dealer who remitting fund out of India. Rule 37BB defines the manner to furnish information in form 15CB and making declaration in form 15CA.
(Information to be furnished for payments to a non-resident not being a company, or to a foreign company)
1.1 When Form 15CA is required:
Every person making payment to non-resident, shall deduct tax if payment is taxable and furnish information in Form 15CA. Form 15CA can be submitted online or offline mode.
Form 15CA has four parts and depending upon the cases taxpayer needs to fill the relevant part.
- PART A: Where the remittance or the aggregate of such remittance does not exceed ₹5 lakh during the financial year.
- PART B: Where remittance or the aggregate of such remittances exceed 5 lakh rupees during the financial year and certificate or order of ‘Nil’ or ‘Lower’ rate under section 195(2) / 195(3) /197 of the Act has been obtained from the Assessing Officer.
- PART C: Where the remittance or the aggregate of such remittance exceed ₹5 lakh during the FY and a certificate in Form No 15CB from a chartered accountant has been obtained.
- PART D: Where the remittance is not chargeable to tax under the Income Tax Act, 1961.
1.2 When is Form 15CA not required to be furnished?
As per the rule 37BB, Form 15CA is not required to be furnished in the following two cases:
1. Where prior approval is not required for remittance by an individual under the Liberalised Remittance Scheme (LRS) of Foreign Exchange Management Act (FEMA) within limit of US $ 2,50,000 for:
- Private visit to any country (except Nepal and Bhutan)
- Gift or donation
- Visiting abroad for employment
- Maintenance of close relatives abroad
- Travel for business, conference, specialised training, medical treatment, studies abroad, and any current account transaction
2. Remittance is of 33 items has been specified under relevant purposes code as per RBI (Annexure-A)
1.3 When should I file Form 15CA:
There is no time limit has been prescribed however it should be submitted before the remittance of money to the non-resident is made.
Form 15CB (Certificate of a Chartered Accountant)
2.1 When Form 15CB is required-
Form 15CB is required when any payment is made to non-resident which are taxable and if payments exceed Rs. 5 lakh in a financial year. In Form 15CB, Chartered accountant certifies the details of payment, tax deduction on payment, nature and purpose of payment. It is to be noted the Form 15CB is an event-based form and required for each remittance.
2.2 How to submit Form 15CB:
Form 15CB can be submitted through the following methods:
- Online Mode – through e-Filing Portal
- Offline Mode – through offline utility
2.3 Documents required for Form 15CB:
For the transaction:
- Purchase invoices/ Purchase order
- Agreement with vendors
- Transaction details and documents
- NO Permanent Establishment (PE) and Business connection certificate if payee has no PE or Business connection with India.
- If payee is availing DTAA benefit then Valid Tax Residency Certificate (TRC), Form 10F,etc.
- There are lot of challenges arise at the time of filing of Form 15CA and 15CB since rules and forms are complex and the person making payment should be very cautions and take professional/tax consultant advise when the amount exceed Rs. 5 lakh.
- A person who is responsible for making payment to a non-resident and who, on the instructions of the non-resident, makes payment to his agent in India, is nevertheless liable to deduct tax under section 195 of the income tax act (Narsee Nagsee vs CIT 35 ITR 134)
|1||S0001||Indian investment abroad – in equity capital (shares)|
|2||S0002||Indian investment abroad – in debt securities|
|3||S0003||Indian investment abroad – in branches and wholly owned subsidiaries|
|4||S0004||Indian investment abroad – in subsidiaries and associates|
|5||S0005||Indian investment abroad – in real estate|
|6||S0011||Loans extended to Non-Residents|
|7||S0101||Advance payment against imports|
|8||S0102||Payment towards imports – settlement of invoice|
|9||S0103||Imports by diplomatic missions|
|11||S0190||Imports below Rs.5,00,000 – (For use by ECD offices)|
|12||S0202||Payment for operating expenses of Indian shipping companies operating abroad|
|13||S0208||Operating expenses of Indian Airlines companies operating abroad|
|14||S0212||Booking of passages abroad – Airlines companies|
|15||S0301||Remittance towards business travel|
|16||S0302||Travel under basic travel quota (BTQ)|
|17||S0303||Travel for pilgrimage|
|18||S0304||Travel for medical treatment|
|19||S0305||Travel for education (including fees, hostel expenses etc.)|
|21||S0501||Construction of projects abroad by Indian companies including import of goods at project site|
|22||S0602||Freight insurance – relating to import and export of goods|
|23||S1011||Payments for maintenance of offices abroad|
|24||S1201||Maintenance of Indian embassies abroad|
|25||S1202||Remittances by foreign embassies in India|
|26||S1301||Remittance by non-residents towards family maintenance and savings|
|27||S1302||Remittance towards personal gifts and donations|
|28||S1303||Remittance towards donations to religious and charitable institutions abroad|
|29||S1304||Remittance towards grants and donations to other Governments and charitable institutions established by the Governments|
|30||S1305||Contributions or donations by the Government to international institutions|
|31||S1306||Remittance towards payment or refund of taxes|
|32||S1501||Refunds or rebates or reduction in invoice value on account of exports|
|33||S1503||Payments by residents for international bidding.|
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