International Tax – Foreign Remittance Certificate 15CB on payment for Import Purchases
Import Purchases constitute a major part of Indian Economy and payments to overseas supplier are a regular phenomenon in International Banking and remittances are being easily made in the Globalised Banking System. Normally Banks did not demand any CA certificate for making remittances for Import Purchases of goods, however with the change in Income tax Rules vide Notification No. 67 of 2013, dated 2 September 2013, with regard to Remittances Banks started insisting on CA Certificate.
Foreign Exchange Management Act prescribes for a No Objection Certificate from Income tax Authorities before making any foreign remittance. However considering the voluminous transactions and limited resources with the Income tax Department an alternate facility is provided wherein a Chartered Accountant’s Certificate (i.e. Form 15CB) along with Assessee’s undertaking (Form 15CA) submitted to Authorised dealer shall substitute NOC from Department.
CA certificate in Form 15CB is determination of tax, if any on subject income. Payments made against Import Purchases constitutes Business Income of the Overseas Supplier and is taxable in India only if it is attributable to a Business connection/Permanent Establishment in India as per Section 9(1)(i) and respective Double Tax Avoidance Agreement. It is settled law that in absence of any income chargeable to tax in India there cannot be any application of Section 195 (See GE India’s case in 327 ITR 456 SC)
To examine the taxability of income accruing on such overseas payments in view of above principles, requirement of such CA certificate has always been there.
It has been seen that since payment against Import Purchase of goods are not taxable in India, so neither Banks nor Authorised Dealers insisted for such certificate and confusion prevailed on requirement of CA certificate for Import payments. To clarify this position RBI had issued Circular No. 3 on 19.07.2007 providing that CA certificate in respect of TDS is required even in respect of remittances which are in nature of trade transactions such as import payments. Even after this Circular there were very few Banks insisting on such certificate.
CBDT revised the Form 15CB and Form 15CA with effect from October 1, 2013 and also exempted certain class of payments from requirement of obtaining such Certificate. Notably Trade payments including Import Purchases do not find place in this list which has stirred the Banks to demand for CA certificate in New Form 15CB.
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.
- 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 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.
- In form 15CB, A CA certifies details of the payment, TDS rate and TDS deduction as per Section 195 of the Income Tax Act, if any DTAA is applicable, and other details of nature and purpose of the remittance.
- Upload of Form 15CB is mandatory prior to filling Part C of Form 15CA. To prefill the details in Part C of form 15CA, the Acknowledgement Number of e- verified form 15CB should be verified.
Payment / Remittances don’t require 15CA & 15CB?
- Individual is not required to furnish the information in Form 15CA and 15CB for remittance which requires no RBI approval.
- List of payments (33 items) mentioned in Rule 37BB which does not require compliances and reporting through the submission of 15CA and 15CB
So with time, awareness on this issue will increase and there will be overwhelming demand for CA Certificate on Import purchases which will significantly increase opportunity for CA’s practicing and having knowledge of International tax.
Also Read:
Basic Understanding on Form 15CA and 15CB
All about form 15CA & Form 15CB
Form 15CA & 15CB, Its Provisions, Related Rules and Filing
Authors :-
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CA.Pankaj Shah |
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(Republished With Amendments)
Dear Sir
If any software is imported then
Whether 15ca/cb required?
What is TDS applicability?
MY CLIENT IS PURCHASES MACHINERY FORM USA CAN I DEDUCT ANY TDS IN THIS TRANSACTION
Which article of DTAA deals with imports of purchases
Hello Respected Members
I am a chartered accountant and I have to issue form 15CB for import goods but the client does not give me any declaration regarding permanent establishment of foreign party in INDIA. In this situation I assume that the foreign party does not have any permanent establishment in INDIA. pl let me know whether I am doing correct or not.
Under which category in 15CA, payment regarding to import of materials is done
Under which category in 15CA, payment regarding to import of materials is done.
hi
can anyone please update that do we need to pay tds even on import of raw material?
if yes at what rate?
IF IMPORTER MAKING PAYMENT TO OVERSEAS BUYERS ON DUE DATE BY LC, DOES IT REQ FORM 15CA.
plz send
Any update on this Article with regard to the latest Amendment in Finance Act 2015.
Since the rule 37BB on income site is still no updated nor the Form 15CA has changed on Income tax site with regard to “whether or not chargeable to tax”
Waiting for some clarification on this issue as some banks are insisting for Form 15CA and the same is not updated yet and it still says only “Chargeable to tax”
Thank you
Hi
I would like to know if overseas supplier supplying to Govt company in India, Do overseas supplier has to apply for Income tax certificate ?
As the Trade payments towards Import payment is not there in the specified list.. so Bank can insist for declaration..
but i would like to know how can one find whether the Overseas Supplier is attributable to a Business connection/Permanent Establishment in India?
And how can a CA give Form 15CB as he is not a Govt Agency to find about the Business connection / Permanent Establishment of Overseas Supplier in India?
CA will have to ask for Declaration from this Overseas Supplier about his non establishment in INDIA, in order to prepare Form 15CB?
Agreed with CA Jigishu Bheda. The scope of rules restricts only to Income chargeable to tax in India so no question of applicability of Form 15CA/CB for import payments without establishing Business Connection/Permanent Establishment.
reply of CA. Jigishu Bheda, is convincing.But still some banks such as PNB and Canara Bank are insisting for Form 15CA and 15CB for payment of import invoices.
Is there any clarification received from Income Tax authorities as not to file such forms for import payments so that banks can be convinced.
rgds
I want to purchase a machinery from Taiwan (china). For remittance of payment to supplier, bank required 15CB certificate attested by Chartered Accountant. when i go to my CA he said that ” i have to pay 10% of remittance amount as Tax (Tds). Is that true to pay before purchase of machinery .Can u suggest. please reply….
i need machinery for my new setup of business….
Since the notification no. 67 does not contain the remittance of import of goods I feel now the form 15CB is required from CA for remittance ag. import of goods , what are the points to be taken into account before issuing the certificate.
I AM AN IMPORTER (having a firm) of software (non-packaged and getting the license/code through email— software is mostly downloaded by customer from product’s website) AND MAKING PAYMENT AGAINST FINAL INVOICE TO a Software OVERSEAS Distributor(please note – my import is not regular and just started happening once or twice a year)ON DUE DATE by DIRECT PAYMENT.
This is just for the first time that payment exceeded Rs. 2 lac fifty thousand mark.
I am a regular tax payer and charge SERVICE TAX and VAT on the imported software and deposit it with the concerned departments.
DOES IT REQ 15CA/15CB to be furnised or TDS to be deducted.
IAM IMPORTER AND MAKING ADVANCE PAYMENT AGAINST PROFORMA AND CONTRACT AND ALSO PAYING BALANCE PAYMENT TO OVERSEALS BYUERS ON DUE DATE BY LC OR DIRECT PAYMENT
DOES IT REQ 15CA
Dear sir Jigishu Bheda
without knowing about permanent establishment or Business Connection, hw you will be able to know that, whether income chargeable to tax in india or not.
and for that purpose 15CB required in all transaction including imports.
And also note sir department has excluded the import payment in Sept 13 circular which was mentioned in Aug 13 circular, because if permanent establisment or Business Connection condition fulfill then income is chargeable in india and TDS will be applicable.
Sir/madam -Thanks for sharing
In my opinion, the import purchases will fall under any one of the below categories listed in the Specified List:
7.S0101 Advance payment against Import
8.S0102 Payment towards imports – Settelment of Invoice.
Pls let us know if our understanding is correct.
Warm regards,
The import payments are covered under entry 0102 no need to have certificate 15CB
I think import purchase payments are very much covered in the specified list in the notification under S0101 and S0202 for advance payment against imports and payment towards imports – settlement of invoice respectively.
IT IS NECESSARY TO GET TRC
IF TRC NOT AVAILABLE WHAT OPTIONS ARE AVAILABLE TO ISSUE 15CB
It is ridiculous that CAs like you misguide people without proper reading the notification & sites like taxguru also publish this without varifying it’s santity.
You MUST HAVE OBSERVED earlier form 15CA/CB were revised in Aug-13 which were superceded by notification 67 of Sep-13. One of the substantial change in new notification is CHANGE IN SCOPE OF RULE 37BB, where starting line of the rule itself were changed to “INCOME CHARGEBLE TO TAX IN INDIA” which itself means that when income is not chargeable to tax in india, 15CA & 15CB are not required to be filled.
SPECIFIC EXCLUSION LIST of payments mentioned in that notification are mainly of FUND TRANSFER nature, whereas, income nature transaction are excluded from rule itself by changing scope of the rule….
Banks are insisting because they have binding RBI circular, however, the same is not enforceable by tax authorities…
Is there any threshold limit for furnishing 15 CA , CB .