Everything you need to know about Form 15CA and 15CB

Remittance to Non-Resident

Any payment made to a non-resident or a foreign company is subject to various rules and regulations. As per provisions of Section 195 of Income tax Act,1961 any person responsible for paying money to a non-resident including foreign company shall deduct income tax for payment made to non-resident.

The remitter making payment to non-resident should furnish an undertaking in Form 15CA containing the information relating to payment of such sum along with certificate attested by Chartered Accountant in Form 15CB. Various aspects of the above compliance are covered as under-:

Part 1: Applicability

Form 15CA is a declaration by any person intending to make remittance:

• to non-resident or to foreign company (irrespective of whether remittance is subject to tax)
• by remitter who can be resident /non-resident/ domestic company/foreign company
• when income accrues/ arises/ received or deemed to accrue/ arise/ received in India (Section 5 of Income Tax Act).

Form 15CB is a certificate required to be filed by the Chartered Accountant when remittance is made

• to non-resident or foreign company is taxable and
• the payment exceeds Rs. 5,00,000/-; and
• when order/ certificate has not been received from Assessing Officer (AO).

Part 2: Non-Applicability

1. 1. When is Form 15CA not required?

• When the remitter makes remittance as per the specified list of payments in Rule 37BB of Income Tax Rules.
  (Refer: Income Tax Rules)
• Not applicable to an individual who does not require RBI approval as per Section 5 of the Foreign Exchange Management Act, 1999.
  Example: Mr. A remitted USD 1,25,000 to his son who went to Germany for higher educations. The amount remitted does not exceed the threshold limit of USD 2,50,000 therefore no RBI approval is required for such remittance and Mr. A is not required to file Form 15CA.

2. 2. When is Form 15CB not required?

• When the remittance is not taxable.
• If the income is taxable in the country of residence of the remittee.
• When the aggregate of remittances during the financial year does not exceed Rs. 5,00,000.

3. 3. Which are the specified payments where Form 15CA/15CB is not required?

   The following are the specified payments where Form 15CA/15CB is not required:

   » Indian investment abroad	» Loans extended to Non-Residents
   » Advance payment against imports» Imports by diplomatic missions» Intermediary trade	» Imports below Rs.5,00,000
   » Payment for operating expenses of Indian shipping companies operating abroad	» Construction of projects by Indian companies including import of goods at project site
   » Freight insurance	» Operating expenses of Indian Airlines companies
   » Travel under basic travel quota (BTQ)/ business travel/ pilgrimage/ medical treatment/ education	» Payments for maintenance of offices abroad
   » Remittances by foreign embassies in India	» Remittance by non-residents towards family maintenance and savings
   » Remittance towards personal gifts and donations	» Remittance towards donations to religious and charitable institutions abroad
   » Remittance towards grants and donations to other Governments and charitable institutions established by the Governments	» Contributions or donations by the Government to international institutions
   » Remittance towards payment or refund of taxes	» Refunds or rebates or reduction in invoice value on account of exports
   » Payments by residents for international bidding

   Part 3: Taxability

   1. 1. What is the tax treatment of the remittances?

   

   *In case if no PAN is furnished then TDS will be deducted at 20% (if details of remittee is not furnished as per Rule 37BC of Income Tax Rules) or relevant TDS rate whichever is higher.
   # Person can opt for Exemption method or Tax credit method whichever is beneficial.

   2. 2. What are TDS rates applicable?

   Nature of Payment	Foreign Company	Other than Foreign Company
   Long Term Capital Gains u/s 115E, 112, 112A	10%	10%
   Other Long-Term Capital Gains (excluding u/s 10(33) & 10(36))	20%	20%
   Short Term Capital Gains u/s. 111A	15%	15%
   Interest payable on moneys borrowed or debt incurred in Foreign Currency	20%	20%
   Royalty & Fees for technical services u/s. 115A	10%	10%
   Winnings from Lotteries, Crossword Puzzles and Horse Races	30%	30%
   Income by way of dividend	20%	20%
   Any Other Income	40%	30%

   3. 3. What are the rates of surcharge and education cess?

   Type of Payment	Income/Payment	Surcharge	Health and Education Cess
   Payments to Foreign Co.	Up to 1 crore	Nil	4%
   	1 crore > 10 crores	2%
   	> 10 crore	5%
   Payments to Non-Residents (Other than Foreign Company)	Up to 50 lakh	10%	4%
   	1 crore > 2 crores	15%
   	2 crore > 5 crores	25%
   	> 5 crores	37%

   Part 4: Compliance

   1. 1. What are the various parts of Form 15CA?

   

   2. 2. What is the procedure for filing Form 15CA and 15CB?

   

   3. 3. What are the details required to file the forms?

   

   Part 5: Frequently Asked Questions (FAQs)

   1. If A Ltd, Indian Company is making remittance to Mr. B, who is a resident of Australia of Rs. 3,80,000 /- then which form is applicable?

   Our view: If the remittance is not exceeding Rs. 5,00,000/-, then A Ltd needs to file Form 15CA- Part A and Form 15CB is not required since the amount is less than INR.500,000 /-

   2. If X Ltd, Indian Company remits money to Y Ltd, Foreign Company of Rs. 10,00,000/-, then what compliance is required to follow by X Ltd?

   Our view:

   • » In case if remittance is not taxable, then X Ltd needs to furnish details in Form 15CA- Part D and Form 15CB is not required.
   • » In case if remittance is taxable and order/ certificate is received from AO then Form 15CA- Part B is required to be furnish and Form 15CB is not required.
   • » In case if remittance is taxable and no order is received from AO, X Ltd will have to obtain certificate in Form 15CB from Chartered Accountant and then furnish details in Form 15CA-Part C.

   3. Mr A resident of Bhutan earned agriculture income of Rs. 60,000/- (land situated in Punjab). Mr A’s assistant (resident of India) remits agriculture income to Bhutan. Which form does Mr. A’s assistant need to file?

   Our view: As agriculture income earned is exempt from tax, therefore information needs to be furnished in Form 15CA- Part D and Form 15CB is not required.

   4. An Indian PSU, B Ltd is liable to pay fees for technical services to X Ltd., foreign company in USA. The fees payable is 4.5 million USD. Rate of exchange is Rs/ USD = 70. At which rate TDS should be deducted and what is the procedure for remittance? Can the form be cancelled and what is the period for cancellation?

   Our view:

   • » As India has entered DTAA with US, the rate of TDS will be 10% (excluding surcharge and health & education cess as per Income Tax Act) or 15% (as per DTAA rate) whichever is beneficial to remittee. Therefore, TDS will be deducted at 10% (excluding surcharge and health & education cess as per Income Tax Act).
   • » In case, if no PAN is furnished or details of X Ltd is not furnished as per Rule 37BC of Income Tax Rules, then TDS will be deducted at 20% (excluding surcharge and health & education cess as per Income Tax Act) or 15% (as per DTAA rate), whichever is higher. In this case TDS rate will be 20%.
   • » As remittance is chargeable to tax and total amount of remittance is more than 5 lakhs, T Ltd will have to obtain certificate in Form 15CB from a Chartered Accountant and then the information will be furnished in Form 15CA- Part C.
   • » Printout of the form electronically signed under digital signature needs to be submitted to the banker prior to remitting the payment.
   • » T Ltd can cancel the form within 7 days of filing Form 15CA.

   5. An Indian Company, R Ltd has imported electronics from foreign supplier. The goods are shipped to India and payment is required to be made to this supplier. What compliances are required by the Indian company?

   Our view: R Ltd does not require to file Form 15CA and Form 15CB as imports/advance payments are included in the list of payments specified in the list not required to furnish details under Rule 37BB of Income Tax Rules.

   6. If Mr. Sunil is remitting Rs. 3,00,000/- from India on account of medical treatment of his wife in Canada on 3rd May, 2020. What compliance is required?

   Our view: No, Mr. Sunil does not require to file Form 15CA as remittance made on account of medical treatment abroad is included in the list of payments specified in the list not required to furnish details under Rule 37BB of Income Tax Rules. Therefore, Mr. Sunil is not required to file Form 15CA /15CB. However, Mr. Sunil is required to furnish the following documents to authorised dealers under Liberalised Remittance Scheme:

   1. a. Form A2
   2. b. Application cum Declaration for purchase of foreign exchange under LRS
   3. c. Copy of PAN card

   7. What is the penalty for failure to furnish information or inaccurate information in Form 15CA/ 15CB?

   Our view: If a person fails to furnish information or provides inaccurate information in Form 15CA/ 15CB, then penalty of Rs. 100,000/- is levied.

    

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