Introduction
Are you planning to make international payments from India? Before you send the money, there's a tax compliance twist you need to know. Form 15CA and 15CB are important in ensuring these transactions are reported correctly and meet the compliance standards. This Blog provides a detailed overview of these forms, their significance, filing procedures, and key considerations to help you manage international payments seamlessly.
What is Section 195 of the IT Act of 1961?
According to Section 195 of the Income Tax Act 1961, any individual or entities (including foreign companies) paying to non-residents must deduct income tax at the applicable rate before the payment is done.
Payments covered under Section 195 include interest, royalty, fees for technical services, dividends, capital gains, and other sums chargeable under the Income Tax Act.
Once the tax is deducted, the Taxpayer is responsible for depositing it to the Indian government within a specified time interval.
Additionally, Taxpayers need to provide the payment details and the deducted TDS amount to file the TDS return in Form 27Q.
Non-residents can apply for low or nil withholding tax rates by obtaining a certificate from the Indian tax authorities like a Tax Residency Certificate or Lower Withholding Tax Certificate under Section 197 using Form 13.
The Above taxes are applied based on the non-resident’s eligibility under applicable tax treaties (like DDTAs).
Purpose and scope of 15CA
If a person remits funds to a Non-Resident or Foreign Company, they must file Form 15CA before the amount is transferred and submitted either online or offline mode.
Registered users can file their form in the Income Tax e-filing portal using PAN logins and verify with EVC or digital signature.
The Aim is to support the IT Department in tracking foreign remittances and verifying whether the remitter pays all the taxes as per the provisions of the Act.
When will Form 15CA not be required?
Form 15CA is not required when the remittance is made as per the specified payment categories listed under Rule 37BB of the Income Tax Rules.
Form 15CA is not required if the remittance to a Non-Resident does not exceed ₹5,00,000 in a financial year.
Form 15CA is not required when an individual remits funds for education abroad within the prescribed limit under the RBI’s Liberalized Remittance Scheme (LRS).
Parts of Form 15CA
Part A: Applicable if the remittance or aggregate remittances (subject to tax) do not exceed ₹5 lakh during the financial year.
Part B: Applicable if the remittance or aggregate remittances (subject to tax) exceed ₹5 lakh during the financial year and an order/certificate under Section 195(2), 195(3), or 197 has been obtained from the Assessing Officer (AO).
Part C: Applicable if the remittance or the aggregate remittances (subject to tax) exceed ₹5 lakh rupees during the financial year and a certificate from a Chartered Accountant (CA) in Form 15CB has been obtained.
Part D: Available for non-taxable remittances excluding payments specified under Rule 37BB (3) by persons under Rule 37BB (2).
What is Form 15CB?
Form 15CB is a certificate issued by a Chartered Accountant (CA) under Section 195(6) of the Income Tax Act, 1961, for making payments to non-residents or foreign companies.
It verifies whether the payments comply with the provisions of the Income Tax Act and any applicable DTAA between India and the foreign country.
Form 15CB is required for taxable payments to Non-Residents or Foreign Companies exceeding ₹5 lakh in a financial year.
When will Form 15CB not be required?
Form 15CB is not required when the remittance is not taxable in India.
If total remittances do not exceed ₹5,00,000 in a fiscal year, Form 15CB is not required.
Remittances by individuals for purposes other than foreign tours or purchase of foreign assets, within the RBI's prescribed limits, are exempt from certain requirements.
Remittances by individuals for education abroad, within the RBI's prescribed limits, are exempt from specific requirements.
Documents required for FORM 15CA &15CB
1. Remitter Details
Name
PAN
DSC
Address
Contact details
Place of business
2. Remittee Details
Name
Address
Place of business
Country of remittance
3. Bank Details
Name
Branch
BSR code of the remitter’s bank
4. Details of remittance
Currency
Amount
Details of remittance
Country of remittance
Nature & Date of remittance
5. Documents required for DTAA benefit
TRC
Form 10F
No PE Certificate
Procedure for filing Form 15CA and 15CB
1. Form 15CB:
Consult a Chartered Accountant
Provide details like taxability, remittance amount, DTAA provisions, and the nature of payment
CA reviews and certifies the details before issuing Form 15CB electronically
2. Form 15CA:
Log in to the Income Tax e-filing portal
Select the appropriate part (A, B, C, or D) based on the remittance details
Attach the digitally signed Form 15CB if applicable
Submit the form online
Challenges in filing FORM 15CA/15CB
Select the accurate “Purpose Code” that reflects your remittance in Form 15CB.
Confirm whether the transactions are reimbursed to determine the applicability of Form 15CA and 15CB.
If an amount is remitted as a gift to any relatives abroad, it must be verified for tax deduction and the requirement for Forms 15CA and 15CB filings.
Verify the accuracy of Form 15CA/CB tax rates based on remittance type, DTAA provisions, and the IT Act applicability.
In certain cases, the tax rates for technical services such as royalty and fees, have increased from 10.4% to 20.8%
Note: The TDS rate should be based on the beneficial rate between the DTAA and the IT Act.
Conclusion
Understanding Form 15CA and 15CB is crucial for making cross-border payments from India. Form 15CA is a declaration by the remitter, while Form 15CB is a certification by a Chartered Accountant confirming tax compliance. These forms ensure transparency, help avoid penalties, and simplify international transactions. Whether you're a business owner or an individual, staying on top of these requirements ensures smooth, compliant financial operations.
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