SKP Tax Alert
22 December 2015 | Volume 8 Issue 24
CBDT clarifies reporting requirements for foreign remittances by amending Rule 37BB
  • The Finance Act, 2015 had amended the provisions of section 195(6) of the Income Tax Act, 1961 (the Act) with effect from 1 June 2015. As per the amended provision, any person responsible for paying (remitter) any sum to a non-resident, whether chargeable to tax or not was required to furnish the information of such remittance in such a form and manner as may be prescribed.  
  • This was a significant change as formerly, certification and reporting was required only in cases where a payment made to a non-resident was chargeable to tax.
  • However, Rule 37BB of the Income Tax Rules, 1962 (the Rules), which prescribed the reporting requirement for payments to non-residents, was not amended along with the amendment in the provisions of section 195(6). The rule continued to provide that the reporting requirement in the prescribed form (Form 15CB and Form 15CA) is required only for payments which were chargeable to tax under the provisions of the Act.
  • This anomaly resulted in different views among remitters. Given that the Act was amended, certain remitters were of the opinion that all payments to non-residents, whether chargeable to tax or not, were required to be reported in the specified forms (i.e. Form 15CA & 15CB). However, this could have led to an additional compliance burden for remitters as all import transactions could have come under the reporting requirement.
  • Recently, as a remedial measure and to ease the compliance burden for remitters, the CBDT issued Notification No. 93/2015 dated 16 December 2015, amending Rule 37BB with effect from 1 April 2016. This notification grants certain reliefs to remitters (including exemption from reporting for import payments).
Key amendments to Rule 37BB
The following key amendments to Rule 37BB shall be effective from 1 April 2016:
  • The number of specified payments under Rule 37BB(3) not requiring reporting is expanded from 28 to 33. The additional specified payments are:
    • Advance payments against import
    • Payment towards import-settlement of invoice
    • Intermediary trade
    • Imports below INR 500,000 (For use by ECD offices)
    • Payments for imports by diplomatic missions
  • Earlier, only Part A of Form 15CA was required to be filled in case of remittances to a non-resident, which were chargeable to tax under the Act and which were above INR 250,000 (in aggregate) during the financial year. This limit has now been increased to INR 500,000 (in aggregate) during the financial year.
  • The details previously required under Part B are now bifurcated into Part B and Part C under the amended Form 15CA. In the new Part B, remittances exceeding INR 500,000 and for which lower/NIL withholding tax order has been obtained from the Indian tax authorities, must be reported. The new Part C requires reporting transactions other than those covered in Part A and Part B and where Form 15CB from a Chartered Accountant is obtained.
  • Part D inserted in Form 15CA must be filled in cases where the remittance is not chargeable to tax under the provisions of the Act. However, if the remittance falls under the specified list of 33 items under Rule 37BB (3) or if the remittance is made by an individual and does not require prior approval of the Reserve Bank of India pursuant to Liberalised Remittance Scheme (LRS), no information is required to be furnished even under Part D of Form 15CA.
  • Certain additional information like residential status of remitter, relevant purpose code as per RBI, etc. must also be provided in Form 15CA.
  • Form 15CB must be furnished and verified electronically in accordance with the procedure to be prescribed by the Principal Director General of Income Tax (Systems).
  • New Form 15CC has also been introduced for reporting of foreign remittances by the authorised dealers (i.e. Banks).
SKP's comments
The above amendments will assist in reducing the compliance burden for remitters. The addition of import payments in the specified list which does not require any reporting, would result in substantial relief for the remitters. However, it appears that the remitters would need to continue the existing procedures of reporting in Form 15CA and Form 15CB till 31 March 2016 since these amendments shall be effective from 1 April 2016.  

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