Introduction
Any sum payable to a non-resident including a foreign company is liable to withholding of tax under section 195 of the Income Tax Act, 1961. The tax rate may vary in accordance with the nature of the remittance which should fall within the scope of Section 9.
Further, in accordance with the penal provisions of 206AA, which overrides the entire act, tax is to be withheld at a penal rate of 20% if Permanent Account Number (PAN) of the non- resident is not made available to the remitter. However, a new rule, 37BC inserted with effect from June 24, 2016 provides relief from the penal rate of 20%, when the below mentioned documents are furnished to the remitter:
- Contact details of the remittee
- Tax Residency Certificate (TRC) of the foreign country valid for the Financial Year in which the remittance is to be made is mandatory.
- Tax Identification Number (TIN) of the remittee of its place of residence outside India
However, to curb the issue of Double Taxation, one may refer the Double Tax Avoidance Agreement (DTAA). DTAA is a tax treaty entered between India and the country to which the remittance is to be made. It is entered to eliminate double taxation in case of incomes that are taxable in both the countries. To avail the beneficial tax rate as specified under the Articles of DTAA, availability of TRC, as explained above, is a mandatory pre-requisite.
Procedural Requirements
For the bank to process the foreign remittance, the remittee has to conform with a set of procedural requirements in which it has to issue Form 15CA to the bank.
The form has been categorised under 4 subheads out of which 1 is to be selected and filled.
Part A: This part of the form is to be filled when a single remittance or an aggregate of all remittances to be made, to all the remittees, within a Financial Year (FY) does not exceed Rs.5,00,000.
Part B: This part of the form is to be filled when the below mentioned conditions are fulfilled:
- The remittance, or the aggregate of the remittance within a FY exceed Rs.5,00,000 and
- A low deduction certificate is obtained from the Assessing Officer u/s 197 or,
- A certificate has been obtained from the Assessing Officer u/s 195 (2) for non-deduction of tax under certain payments or,
- A certificate has been obtained by the Assessing Officer u/s 195 (3) for non-deduction of tax on receipt of interest income or certain sum that is otherwise chargeable to tax at specified rates.
Part C: Under this part, a certificate in Form 15CB, to be issued by a Chartered Accountant is required to be furnished before filing Form 15CA. This requirement should be met when the remittance, or an aggregate of such remittance during the FY exceed Rs.5,00,000.
Part D: This part of the form is to be filled when the remittance is not chargeable under the provisions of the Act.
Filing Technique
While 15CA was always furnished electronically, it has become mandatory to issue CA Certificate in Form 15CB electronically with effect from O1.04.2016.
When issuing Form 15CA under Part C, whereby Form 15CB is also a requirement, Part B of ISCA gets auto filled once the 15CB utility is imported. Form 15CA stands complete only after 1I5CB has been uploaded and its acknowledgment number is mentioned in Part A of 15CA.
However, one can withdraw the uploaded Form 15CB within 7 days from the date of upload.
Exceptions to Procedural Requirements
Below mentioned are the exceptions where the procedural requirement of filing Form 1SCA/15CB is not required to be met:
1. Remittances to be made which do not require Reserve Bank of India’s (RBI) approval under the Liberalised Remittance Scheme.
2. Remittances specifically mentioned in Rule 37BB, which has an exhaustive list of 33 nature of payments.
Inference
In order to facilitate foreign remittances, the income tax department has tried to cut down on paper usage and aims at a paperless economy. Further, a relaxation has been granted for remittances that fall below the threshold limit of Rs.5,00,000, in order to cut down on administrative hassles. The Java e- filing utilities for Form 15CB and Form 15CA can be downloaded from the e-filing portal of Income Tax i.e. https://incometaxindiaefiling.gov.in/e-Filing/UserLogin/Login.html#.
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