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

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LLP registration for NRIs and foreign nationals6

Whenever it comes to foreign remittance, the initial thing that comes to our mind is compliance with form 15CA and form 15CB. Most people find it confusing and tedious to comply with form 15CA and form 15CB. Many of them are unaware of the current provisions and compliance methods. With rapid globalization and increasing cross-border transactions daily, it becomes mandatory to deduct taxes from payments made to non-residents. Some cases of these transactions may involve:

  1. When an occupation makes a payment to its technician/freelancer, who is a non-resident.
  2. When a business makes remittance to its advertiser, who is a non-resident.
  3. When an occupation makes a payment of royalty to a non-resident, Etc.

Section 195 of the income tax act, 1961, says that it is compulsory to abstract income tax from payments made to non-residents. Herein comes the notion of form 15 CA and CB. As per the act and its allied regulations, the person making payment/ remittance to non – resident holds the authority to furnish an undertaking (in form 15CA) attested by a chartered accountants certificate in form 15CB.

Form 15CA – Declaration of remittance made to non- resident
Form 15CA is a statement by the remitter and is used as a tool for collecting data regarding payments that are chargeable to tax in the hands of the recipient non-resident. Rough idea: 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 has to be filed online, and also, A has to submit it with 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 double taxation avoidance agreement and the income tax act have been acting per tax deductions while making the payments. It majorly includes the following:

  1. Details and nature of charge made to a non-resident.
  2. Adherence with section 195 of the income tax act. (TDS deductions on deals/payments of non-resident Indians)
  3. Rate of TDS deducted.
  4. The double taxation avoidance agreement is applicable according to specific tax treaties between countries.

Applicability of form 15CA and form 15CB
Following are the applicability of form 15CA and 15CB:

  • If the amount of remittance is not taxable
    • Then noforms are required if covered under a specific exemption list. The list of such payments is expanded under rule 37BB.
    • But if it is not covered under an exemption, then part D of form 15CA must be filed.
  • 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 FY.
    • Part B of form 15CA- If such remittances exceed five lakh rupees throughout the financial year and an order/certificate u/s 195(2) / 195(3) / 197 has been acquired from the AO.
    • Part C of form 15CA – If the total of such payments surpasses five lakh rupees throughout the financial year and a certificate in form no. 15CB from an accountant has been acquired.

Is it compulsory to submit form 15CB?
No, it is not necessary to yield form 15CB. Form 15CB is an event-based form to be filled only when the remittance amount exceeds five lakh rupees during a financial year, and you are required to furnish a certificate from an accountant defined as per section 288.

Amended rules related to submission of form 15CA and form 15CB
Making remittance outside India needs definite compliances. One such compliance is to submit form 15CA and 15CB when needed. The income tax department has amended the regulations relating to the preparation and submission of form 15CA and form 15CB. The amended rules became effective from 1st April 2016. The significant changes are as follows:

  1. Form 15CA and 15CB, which does not require RBI acceptance, will not be required to be furnished by an individual for remittance.
  2. The list of specified payments raised in rule 37BB, which do not need submission of forms 15CA and 15CB, has been enlarged from 28 to 33, involving payments for imports.
  3. Form no. 15CB will only be needed for payments made to non-residents, which are taxable and if the payment exceeds five lakh rupees.

Do’s for form 15CA/CB

  • Special cases where 15CA/CB is applicable and should be taken care of are 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 quantity to be made every twelve months reaches five lakh rupees, the remitter must obtain Form 15CB from a Chartered Accountant.
  • To avail the benefits of DTAA, the recipient of remittance should have a tax residency certificate and PAN number. 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 assesse resided in the foreign country, which is covered under a DTAA with India. Hence, the tax rate pertinent to the income is at the rate raised in the DTAA.

Don’ts for Form 15CA/CB

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

Penalties under form 15CA/CB
If an assessee who was needed 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. Such penal provision shall be attracted even if the person furnished inaccurate particulars.

At AJSH, we assist our clients in dealing with various income tax compliances, including income tax assessments, TDS returns, ITR filings, tax advisory and other related services by providing them adequate support and guidance from our end. If you have any questions or wish to know more about the applicability, do’s and don’ts of forms 15CA and 15CB, kindly contact us.

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