15CA / 15CB: Applicability, dos, and don’ts

As global business grows, so do cross-border payments. And with that, the Indian government has laid down some compliance rules, especially when you’re making payments to someone outside India. One of the key rules? You may need to fill out Form 15CA and Form 15CB.

Now, if you’ve ever tried sending money overseas, you’ve probably heard these names — and maybe even scratched your head over what they mean. You’re not alone! Many people find this process confusing, and the rules often change, making it even harder to keep up. In our previous blog, we shared an overview of what these forms are, how banks and CAs are involved, and when exemptions apply. Now, we’re taking it one step further. In this blog, we’ll walk you through the requirements for these forms and share some simple dos and don’ts to ensure your filings are smooth and stress-free.

Table of Contents

Foreign Payments and Indian Tax Rules

Section 195 of the Income Tax Act, 1961, states that it is compulsory to deduct income tax from payments made to non-residents.

Some cases of these payments may include:

  • When an occupation makes a payment to its technician/freelancer, who is a non-resident
  • When a business makes remittance to its advertiser, who is a non-resident
  • When an occupation makes a payment of royalty to a non-resident, etc.

Herein comes the notion of Form 15CA and CB. As per the Act and its relevant regulations, the person making a payment/remittance to a non-resident is responsible for furnishing an undertaking (in Form 15CA) attested by a certificate in Form 15CB from a chartered accountant.

Form 15CA – Declaration of Remittance Made to Non-Resident

Form 15CA is a statement by the remitter (the person making a payment abroad) and is used as a tool for collecting data regarding payments that are chargeable to tax in the hands of the non-resident recipient.

Example: Suppose “A” needs to make a payment to a non-resident “B”, and the payment made to “B” is chargeable to tax as per Income Tax Act, 1961. Then, “A” has to make a declaration in Form 15CA before making the payment to “B”. This declaration must be filed online, and also, “A” must submit it to the bank/authorized dealer before making the payment.

Form 15CB – Certificate of CA for Applicability of DTAA

Form 15CB is a certificate provided by a chartered accountant, ensuring that the relevant provisions of the Double Taxation Avoidance Agreement and the Income Tax Act have been complied with while making the payments. It majorly includes the following:

  • Details and nature of the charge made to a non-resident
  • Adherence with Section 195 of the Income Tax Act (TDS deductions on deals/payments of non-resident Indians)
  • Rate of TDS deducted
  • The double taxation avoidance agreement is applicable according to specific tax treaties between countries

The Income Tax Department has amended the regulations relating to the preparation and submission of Form 15CA and Form 15CB. The amended rules took effect on April 1, 2016. The significant changes are as follows:

  • Forms 15CA and 15CB, which do not require RBI acceptance, are not required to be furnished by an individual for remittance purposes.
  • The list of specified payments raised in Rule 37BB, which do not require the submission of Forms 15CA and 15CB, has been expanded from 28 to 33, involving payments for imports.
  • Form No. 15CB will only be required for payments made to non-residents that are taxable and if they exceed ₹5 lakh.

Applicability of Form 15CA and Form 15CB

Following are the applicability of Form 15CA and 15CB:

If the amount of remittance is taxable:

  • Part A of Form 15CA – If the aggregate of such remittance does not exceed five lakh rupees during the Financial Year.
  • Part B of Form 15CA – If such remittances exceed five lakh rupees throughout the financial year, and an order/certificate under Section 195(2) / 195(3) / 197 has been acquired from the Assessing Officer (AO).
  • Part C of Form 15CA – If the total of such payments exceeds five lakh rupees throughout the financial year, a certificate in Form No. 15CB from a chartered accountant is required.

If the amount of remittance is not taxable:

  • Then, no forms are required if the individual is covered under a specific exemption list. The list of such payments is expanded under Rule 37BB.
  • However, if it is not covered under an exemption, then Part D of Form 15CA must be filed.

Is it compulsory to submit Form 15CB?

Form 15CB is an event-based form that must be filled out only when the remittance amount exceeds five lakh rupees during a financial year, and you are required to furnish a certificate from an accountant as defined under Section 288, i.e., a No Lower Deduction Certificate or NIL Deduction Certificate has not been obtained from the tax officer.

Do’s for Form 15CA/CB

  • Special cases where 15CA/CB is applicable – should be taken care of: payments made to Facebook or other advertisement agencies, payments made for software purchased/subscription, and purchase of any domain/hosting or any website purchased.
  • If the cumulative amount paid or to be paid during twelve months exceeds five lakh rupees, the remitter must obtain Form 15CB from a Chartered Accountant.
  • To avail of the benefits of DTAA, the recipient of remittance should have a tax residency certificate and a Tax Identification Number, as well as other relevant documents as prescribed. Otherwise, the benefits of DTAA cannot be availed.
  • Form 10F is to be obtained before Form 15CA/CB is generated. It is a declaration that the assessee resided in a foreign country, which is covered under a Double Taxation Avoidance Agreement (DTAA) with India. Here, the tax rate applicable to the income is the rate specified in the DTAA. If you want to know in detail about the relative rates in DTAA, you can Click Here.

Don’ts for Form 15CA/CB

  • Don’t report remittances in the nature of investments abroad, travel expenses, foreign embassies, and other payments covered in detail under Rule 37BB, you can Click Here.
  • Don’t confuse between the fee for technical services and the business income of a foreign party, as there is always an overlap between the two. This helps avoid any litigation in the future.
  • Don’t deduct TDS on remittance if the total amount is not taxable income; instead, apply to the AO with an income calculation. A person can accept the amount of income on which TDS is to be deducted from foreign parties.

Penalties

If an assessee who was required to file Form 15CA/15CB fails to furnish the same before making remittance to a non-resident, he shall be liable to penalty provisions under Section 271I of the Income Tax Act, 1961. Failure to submit Form 15CA or 15CB (when required) before making the remittance may attract a penalty of ₹1,00,000 under Section 271I of the Income Tax Act, even for inaccurate disclosures.

Conclusion

To wrap it up, understanding when and how to file Form 15CA and 15CB can save you from unnecessary delays and penalties during foreign remittances. With the proper guidance and up-to-date knowledge, the process becomes much more manageable. Always double-check the rules, and when in doubt, consult a professional to stay on the safe side.

At Mercurius, our team of professionals includes Chartered Accountants certified by the ICAI. We specialize in assisting clients with all compliance and filing requirements under Indian regulations. Whether it’s Form 15CA or the more technical Form 15CB, our experts ensure the smooth handling of your remittance-related queries, providing complete support in accordance with legal and procedural requirements. We assist our clients with various income tax compliances, including income tax assessments, TDS returns, ITR filings, tax advisory services, and other related services, providing them with adequate support and guidance.

If you have any questions or would like to know more about the applicability, dos and don’ts of Forms 15CA and 15CB, please Contact Us.