Foreign Payment Compliance (15CA,15CB,Sec.195)

Form 15CA & 15CB

15CA:Declaration by Remiter
15CB:CA certificate

Need or purpose of 15CA and 15CB
The person making a remittance to Non-Resident was required to furnish a certificate in specified format (15CA & 15CB) as specified by RBI.Main purpose was to collect the taxes at a stage when the remittance is made as it may not be possible to collect the tax from the Non-Resident at a later stage.So to monitor and track each transactions in an efficient manner, it was proposed to introduce e-filling of information in the form of certificates.

What is Form 15CA and 15CB?
As per Section 195 of Income tax Act, 1961, every person liable for making a payment to non-residents shall deduct TDS from the payments made to non-residents if such sum is chargeable to Income tax then the withholding tax need to be deducted and form 15CA and 15CB are the declaration for the same.

A person making the remittance (a payment) to a Non Resident or a Foreign Company has to submit the form 15CA. This form is submitted online. In some cases, a Certificate from Chartered Accountant in form 15CB is required after uploading the form 15CA online.

Changes in the requirement of filling the forms:

Below mentioned are the changes in the requirement of filling the forms:

*No Form 15CA and 15CB will be required to be furnished by an individual for remittance which does not require RBI approval under its Liberalized Remittance Scheme (LRS).
*The list of payments of specified nature under Rule 37 BB where submission of Forms 15CA and 15CB is not required has been expanded from 28 to 33.
*A CA certificate (Form No. 15CB in this case) will be required to be furnished only in case of payments made to non-residents which are chargeable to tax and the amount of payment during the year exceeds INR 5 lakhs.

The furnishing of information for payment to non- resident , not being a company, or to a foreign company in Form 15CA has been classified into 4 parts –
PART A: – Where the remittance or the aggregate of such remittance does not exceed 5 lakh rupees during the F.Y. (whether taxable or not).
PART B: – Where an order /certificate u/s 195(2)/ 195(3)/197 of Income Tax Act has been obtained from the A.O. (Whether Nil rate or Lower rate Certificate).
PART C: – Where the remittance or the aggregate of such remittance exceed 5 lakh rupees during the FY.
PART D: – Where the remittance is not chargeable to tax under Domestic law.

15CB is the Tax Determination Certificate where the Chartered Accountant(CA) examines the remittance with regard to chargeability provisions under Section 5 and 9 of the Income Tax Act along with the provisions of Double Tax Avoidance Agreements.

Provisions of section 195 mandate the person to deduct income tax (i.e. TDS) from the payment made to the non-resident. Here, [as per provisions of section 195 (6)  read with rule 37BB] the person making payment to the non-resident is required to furnish the following forms as per the below table –

Particulars                                                                                  Furnishing of relevant Forms
When the payment made is less than INR 5 Lakhs                   Part A of Form 15CA
When the payment made is more than INR 5 Lakhs                 Part B of Form 15CA;Chartered Accountant certificate in Form 15CB; and Part C of Form 15CA.
When the payment made is not chargeable to income tax        Part D of Form 15CA

List of Payment / Remittances Do not require 15CA & 15CB:

*Individual is not required to furnish the information in Form 15CA and 15CB for remittance which requires no RBI approval.
*There are 33 types of foreign remittances where you do not require any submission of Form 15CA or Form 15CB as mentioned below:

1       Indian investment abroad – in equity capital (shares)
2    Indian investment abroad – in debt securities
3    Indian investment abroad- in branches and wholly owned subsidiaries
4    Indian investment abroad – in subsidiaries and associates
5    Indian investment abroad – in real estate
6    Loans extended to Non-Residents
7    Advance payment against imports
8    Payment towards imports- settlement of invoice
9    Imports by diplomatic missions
10    Intermediary trade
11    Imports below Rs.5,00,000- (For use by ECD offices)
12    Payment- for operating expenses of Indian shipping companies operating abroad.
13    Operating expenses of Indian Airlines companies operating abroad
14    Booking of passages abroad -Airlines companies
15    Remittance towards business travel.
16    Travel under basic travel quota (BTQ)
17    Travel for pilgrimage
18    Travel for medical treatment
19    Travel for education (including fees, hostel expenses etc.)
20    Postal Services
21    Construction of projects abroad by Indian companies including import of goods at project site
22    Freight insurance – relating to import and export of goods
23    Payments for maintenance of offices abroad
24    Maintenance of Indian embassies abroad
25    Remittances by foreign embassies in India
26    Remittance by non-residents towards family maintenance and savings
27    Remittance towards personal gifts and donations
28    Remittance towards donations to religious and charitable institutions abroad
29    Remittance towards grants and donations to other Governments and charitable institutions established by the Governments.
30    Contributions or donations by the Government to international institutions
31    Remittance towards payment or refund of taxes.
32    Refunds or rebates or reduction in invoice value on account of exports
33    Payments by residents for international bidding.B which does not require compliances and reporting through the submission of 15CA and 15CB. Those nature of 
remittance are as under:

Penalty in case of Not filing form or Inaccurate information under section 271-I;

In case of default Assessing Officer may direct the defaulter to pay an amount of INR 1 Lakhs as a penalty. However, as per provisions of section 273B of the Income Tax Act, no penalty can be imposed under section 271-I, in case the defaulter proves the reasonable cause for the failure.

Even in cases where 15CA is not mandated. It is advisable in the assessees interest to have a tax determination in Form 15CB from a CA, since non-resident taxation involves various complex issues and the consequences of non-deduction are severe.

Documents required for filling Form 15CA and 15CB:-

♥ Details of Remitter
Name,Address,PAN,Principal Place of Business,E-mail ID & Phone No. of the Remitter
Status of the Remitter (Firm/ Company/ Other)
Digital Signature of Remitter for submission of Form 15CA (Since now the Form needs to be filed electronically)

♥ Details of Remittee
Name,Address,Principal Place of Business,Country and Status of the Remittee.

♥ Details of Remittance
Country to which the Remittance is made
Currency
Amount of Remittance in Indian Currency
Proposed Date of Remittance
Nature of Remittance as per Agreement (Invoice Copy)

♥ Bank Details of Remitter
Name of Bank,Name of Branch,BSR Code of Bank.

♥ Documents required for DTAA Benefit
Tax Residency Certificate (TRC) from the Remittee (Tax Registration of the Country in which remittee is registered).
Form 10F duly filled by the Authorized person of the remittee (Self Declaration).
No PE (Permanent Establishment) declaration. This is mandatory if the Income is a business Income.