Introduction: Foreign remittances play a crucial role in the global economy, with individuals and businesses frequently transferring funds across international borders. However, what often goes unnoticed are the tax implications associated with these transactions. To ensure transparency and compliance with tax regulations, the Indian government introduced Form 15CA and 15CB. In this article, we will delve into the intricacies of these forms, their significance, and when and how they should be submitted.
✍️ Form 15CA and 15CB must be submitted when making payments outside India. They must be presented under different conditions.
✍️ Overseas remittances have tax ramifications that the majority of taxpayers disregard. Section 195 of the Income Tax Act of 1961 stipulates that tax must be deducted from any payments made to non-residents.
✍️ The goal of tax deduction is to collect taxes from non-resident aliens at an earlier stage, as it may be impossible to do so later.
✍️ In certain instances, the individual making payments to NRIs must submit an affidavit on Form 15CA together with Form 15CB.
👉 Now, first of all, let’s understand all about Form 15CA.
✍️ Form 15CA is a declaration of the remitter (sender of money to NRI) and is considered a tool for collecting information on payments to Non-residents. This will help the Income Tax Department determine whether the payments are taxable or non-taxable in the hands of non-residents. Banks and authorized dealers are now becoming more conscious in ensuring that Form 15CA/Form 15CB is received by them before remittance.
✍️ A person making foreign remittances needs to furnish Form 15CA. It is required to be submitted online.
✍️ Form 15CA consists of 4 parts.
Part A: This section must be filled out if the remittance is taxable, and the total of such remittances does not exceed Rs 5 Lakhs during the financial year.
Part B: Part B becomes necessary when the remittance is subject to taxation, and the total of such remittances exceeds Rs 5 Lakhs during the financial year. Additionally, an order or certificate under sections 195(2), 195(3), or 197 of the Income Tax Act must be obtained from the Assessing Officer.
Part C: Part C should be completed if the remittance is taxable, and the total of such remittances surpasses Rs 5 Lakhs during the financial year. This part mandates obtaining a certificate in Form 15CB.
Part D: Part D is applicable when the remittance is not subject to tax under the provisions of the Income Tax Act.
✍️ In certain cases, such as uploading Part C of Form 15CA, an Acknowledgment number of Form 15CB is mandatory.
✍️ A certificate from a practicing Chartered Accountant in Form 15CB is required to be submitted along with Form 15CA.
✍️ The liability of withholding tax can be ascertained and certified by obtaining the certificate from a Chartered Accountant in Form No 15CB. A CA certifies the details of payment, TDS rate, TDS deduction, etc.
✍️ However, certain exceptions are there where Form 15CA and Form 15CB are not required for payments prescribed by RBI as per rule 37BB and transactions that do not require RBI approval. In accordance with sub-rule (3) of Rule 37BB, information in Form 15CA is not required to be furnished in case of following transactions:
- Remittance is made by an individual and does not require prior approval of RBI
- Remittance is of the nature specified in column (3) of the specified list below:
SPECIFIED LIST
| Sl. No. | Purpose code as per RBI | Nature of payment |
| (1) | (2) | (3) |
| 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 |
| 10 | S0104 | Intermediary trade |
| 11 | S0190 | Imports below Rs.5,00,000 – (For use by ECD offices) |
| 12 | SO202 | Payment for operating expenses of Indian shipping companies operating abroad |
| 13 | SO208 | 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.) |
| 20 | S0401 | Postal services |
| 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. |
Conclusion: In conclusion, Form 15CA and 15CB are critical tools for ensuring tax compliance when it comes to foreign remittances. Understanding the different parts of Form 15CA, the role of Form 15CB, and when they are required is essential for individuals and businesses engaged in international transactions. Chartered Accountants play a pivotal role in certifying these forms, helping taxpayers navigate the complex world of taxation in cross-border financial dealings. By following the guidelines and submitting these forms accurately, one can ensure smooth and legal foreign remittances while avoiding potential tax issues in the future.
Author Bio
Thank you for the detailed write up. I have one uery….under S1301, Family maintenance by non-residents has been mentioned by Income Tax authorities. What is meant by Non-Resident here? Is it NRI? If yes, NRI payments for family mintenance overseas is not permitted under FEMA