As per Section 195, every person making a payment to Non-Residents (not being a Company), or to a Foreign Company shall deduct TDS if such sum is chargeable to Income Tax and the details are required to be furnished in Form 15CA. A person responsible for making such remittance (payment) has to submit the form 15CA, before remitting the payment. This form can be submitted both online and offline mode. In certain cases, a Certificate from Chartered Accountant in form 15CB is required before uploading the form 15CA online.
Objectives
The key objectives of Form 15CA and 15CB are as:
1. Enhancing Transparency:
Form 15CA mandates remitters to provide comprehensive details of the remittance, including its purpose and nature, this ensures transparency in cross-border payments, providing tax authorities with essential information regarding international transactions.
2. Ensuring Tax Compliance:
Form 15CB, certified by a Chartered Accountant (CA), verifies that the transaction complies with the provisions of the Income Tax Act and other relevant laws. It reinforces tax compliances and helps in preventing tax evasion by ensuring that the remittance adheres to legal requirements.
3. Preventing Tax Evasion:
Mandatory submission of Form 15CA and 15CB enables tax authorities to monitor and scrutinize international transactions effectively which helps the tax authorities to identify and investigate potential instances of tax evasion or avoidance, thereby mitigating the risk of revenue loss.
Parts of Form 15CA
Form 15CA has four sections explaining different scenarios of remittance:
1. Part A: This section applies if the remittance or the aggregate of such remittances is chargeable to tax under the Income Tax Act, and the remittance amount does not exceed INR 5 lakh during the financial year.
2. Part B: If the remittance is chargeable to tax and the remittance or the aggregate of such remittances exceeds INR 5 lakh during the financial year, this section is applicable. Additionally, an order/certificate under sections 195(2), 195(3), or 197 must have been obtained from the Assessing Officer.
3. Part C: When the remittance is chargeable to tax and the remittance or the aggregate of such remittances exceeds INR 5 lakh during the financial year, this section applies. A certificate in Form No. 15CB from a Chartered Accountant must be obtained in this scenario.
4. Part D: This section applies if the remittance is not chargeable to tax under the Income Tax Act.
Details Required for Filing Form 15CA
Form 15CB
Form 15CB is a vital component in the process of making payments to non-residents in India. It functions as a certification provided by a Chartered Accountant (CA), affirming that the payment made to a non-resident or foreign company complies with the provisions outlined in the Income Tax Act, 1961, and that the appropriate Tax Deducted at Source (TDS) has been deducted from the remittance. This form holds significance when the remittance exceeds INR 5 lakh within a financial year, ensuring that taxes are accurately accounted for and remitted to the government.
Parts of Form 15CB
Form 15CB comprises several parts, each serving a specific purpose:
1. Part 1: This section captures details of the remitter, the beneficiary, and the nature of the remittance. It includes information such as the name and address of the remitter and beneficiary, PAN (Permanent Account Number) of both parties, country of the remitter and beneficiary, purpose of remittance, and the amount of remittance.
2. Part 2: Here, the Chartered Accountant (CA) verifies whether the provisions of the Income Tax Act and the Double Taxation Avoidance Agreement (DTAA) have been complied with. The CA provides details of the relevant sections and articles of the Income Tax Act and the DTAA that are applicable to the transaction. This part ensures that the remittance is made in accordance with the tax laws and international agreements.
3. Part 3: In this section, the CA certifies that the information provided in the form is true and correct. The CA’s certification adds credibility to the information furnished in Form 15CB, assuring the tax authorities of its accuracy and compliance with regulations.
4. Annexure: The annexure is an optional section of the form that can be used to provide additional information or details related to the remittance.
Penalty for not filing Form 15CA-15CB
Non-compliance with the requirement to file Form 15CA and 15CB can attract penalties and interest. The penalty for not filing Form 15CA and 15CB is covered under Section 271-I of the Income Tax Act, 1961. As per the current regulations, the penalty for non-filing or incorrect filing of Form 15CA and 15CB is INR 1 lakh or equal to the transaction amount, whichever is lower.
Examples of transactions that require 15CA-15CB Filing
Here are some transactions which require 15CA/CB Filing:
1. Payment for import of goods or services
2. Payment for royalty or technical fees
3. Remittance of dividends
4. Payment for foreign collaborations or joint ventures
5. Remittance for education-related expenses
6. Remittance for medical treatment abroad
7. Remittance for travel expenses
Transactions where Form 15CA is not required
- If the payment is made using the list of approved payments found in Income Tax Rules Rule 37BB, Form 15CA is not needed.
- In cases where the Foreign Exchange Management Act (FEMA), 1999, Section 5, does not require the Reserve Bank of India’s consent for the individual making the transaction.
- Additionally, if the remittance is tax-free under the Income Tax Act or an applicable tax treaty, Form 15CA is not needed.
- When the total amount remitted by an individual throughout the fiscal year does not surpass five lakh rupees, and the remittance is not utilized for a foreign tour or payment towards the acquisition of any foreign asset.
- When a person sends money home to continue their studies overseas, it doesn’t go over the limit prescribed by the RBI
Transactions where Form 15CB is not required
- If the payment is not taxed in India, Form 15CB is not needed.
- if the remittance is made to the remittee’s home country and that nation views the income as taxable.
- If the total amount of remittances made during the fiscal year does not exceed Rs. 5,00,000, Form 15CB is not required.
- The amount remitted by an individual does not above the RBI’s stipulated limit if it is not for a foreign tour or payment for the acquisition of any foreign asset.
- The amount remitted by a person to pursue education overseas does not above the ceiling set by the RBI.
Role of Chartered Accountant
To acquire Form 15CB, the payer engages a Chartered Accountant (CA), who is tasked with scrutinizing the transaction to ascertain whether the requisite taxes have been deducted or not. The CA meticulously reviews pertinent documents, ensuring strict adherence to tax regulations and verifying compliance with the provisions of the Income Tax Act and Double Taxation Avoidance Agreements (DTAA), if applicable. Upon satisfactory examination, the CA issues Form 15CB, attesting to the transaction’s tax compliance.
Conclusion
These sections provide clarity and categorization based on the amount of remittance, tax liability, and the requirement of certification by a Chartered Accountant, ensuring compliance with tax regulations in different scenarios. Overall, Form 15CB’s various parts work together to facilitate the certification process by providing comprehensive details of the remittance, verifying compliance with tax laws and international agreements, and certifying the accuracy of the information provided.
Authors:
CA Prashant Taparia | Partner
Jash Shah | Associate Consultant
For Inquiries: Email: [email protected]
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