Understanding Form 15CA and 15CB: Key Documents for Tax Compliance on Foreign Payments

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Introduction

In today’s globalized economy, businesses and individuals frequently make cross-border payments. Suppose you are an Indian resident making payments to a foreign entity or receiving payments from a foreign entity. In that case, it is mandatory to comply with the legal provisions of the Income Tax Act 1961. according to the Act, you must file Form 15CA and Form 15CB with the tax authorities before remitting funds to a foreign entity. These forms serve as a mechanism for the Indian government to track and tax foreign remittances to ensure that appropriate taxes, if applicable, are withheld at source.

 The Role of Form 15CA

Form 15CA serves as a declaration by the remitter, detailing the payments made to non-residents. It acts as an effective information-gathering tool for the Indian tax authorities regarding amounts that have been transferred abroad. Essentially, this form is a declaration of the intended remittance and provides the details of the tax liability on the part of the payer.

Form 15CA is categorized into four parts, each catering to different types of remittances:

  • Part A: Where the remittance or the aggregate of such remittance does not exceed 5 lakh rupees during the F.Y.
  • Part B: Where remittance or the aggregate of such remittances exceed 5 lakh rupees during the FY and an order / certificate u/s 195(2) / 195(3) /197 of the Act has been obtained from the Assessing Officer.
  • Part C: Applicable when the remittance exceeds INR 5 lakh, and a Certificate (Form 15CB) from a Chartered Accountant (CA) is obtained.
  • Part D: Where the remittance is not taxable under domestic law, for non-residents.

 The Significance of Form 15CB

Form 15CB is essentially a Tax Determination Certificate that is issued by a Chartered Accountant. This form is typically required when taxable remittances exceed INR 5 lakh. The Chartered Accountant examines and confirms the applicability of tax rates and provisions related to Double Tax Avoidance Agreements (DTAA) to determine the appropriate withholding tax on the remitted amount. The role of Form 15CB is crucial because it validates whether the correct tax has been deducted at source (TDS) on the payment being made. The Form 15CB ensuring that remittance complies with the provisions of the Income Tax Act and any relevant DTAA provisions.

 The CA, while issuing Form 15CB, ensures that:

  • The accurate nature of remittance is mentioned in the certificate.
  • The applicable rate of tax as per the Income Tax Act 1961 is calculated.
  • The benefits under any applicable DTAA are considered.

Penalties for Non-Compliance

Non-compliance with the requirements to file Form 15CA and 15CB can lead to penalties. If the required forms are not submitted, the remitter may be penalized, and the payment may be delayed or blocked by the bank. The penalty for not furnishing information or for providing incorrect details can amount to INR 1 lakh as per Section 271-I of the Income Tax Act, 1961.

 Exemptions from Filing Form 15CA and 15CB

There are certain situations where you do not need to file Form 15CA and Form 15CB. These include:

  • Payments that are not subject to TDS under Indian tax laws.
  • Low-value remittances: If the total value of remittances does not exceed ₹5 lakh in a financial year.
  • Payments to foreign governments or international organizations that are covered by specific exemptions under tax treaties
Conclusion: –

Form 15CA and 15CB are crucial components in ensuring tax compliance for international payments. Businesses and individuals must be aware of the procedures and timelines to avoid penalties and facilitate smooth, compliant foreign transactions. Always consult a Chartered Accountant for guidance, especially in complex cases involving tax treaties or exemptions

  Frequently Asked Questions: –

  1. Is it mandatory to file Form 15CA and Form 15CB for every foreign payment?

No, it is only mandatory for payments above ₹5 lakh or those subject to TDS. Small remittances or payments that fall under exempt categories do not require the submission of these forms.

  1. What happens if I make a remittance without filing Form 15CA and Form 15CB?

If you make a remittance without filing these forms when required, the bank may block the payment or ask for the necessary documents before proceeding. Additionally, non-compliance may lead to penalties or legal consequences for failure to meet tax obligations.

  1. Can I file Form 15CA and Form 15CB myself, or do I need professional assistance?

While you can fill out and submit Form 15CA yourself, Form 15CB must be certified by a qualified Chartered Accountant. The CA’s review ensures that all tax implications, including TDS and DTAA, are accurately accounted for.

  1. Can Form 15CA be withdrawn?

Yes, form 15CA can be withdrawn within 7 days from submission date. 

  1. When is Form 15CA not required to be furnished?

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 under relevant purposes code as per RBI
  1. How do I E-Verify Form 15CA?

This form can be e-Verified using DSC or EVC. You need to E-Verify using DSC if DSC is registered. Refer to the How-to e-Verify user manual to understand the step-by-step process for e-Verification.

  1. Can Form 15CB be filed only in the offline mode?

Form 15CB can be filed and submitted both in online and offline mode. The Offline Utility for Statutory Forms enable you to fill and submit Form 15CB in the offline mode.

  1. How should form 15CB be verified? Is there any time limit to submit this form?

This form can only be e-Verified using DSC. The DSC of the CA should be registered on the e-Filing portal. There is no time limit prescribed to submit Form 15CB. However, it should be submitted before the remittance is made

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