Volume 6, Issue 14

12 August 2013

Tax Alert

Amendment of Forms 15CA and 15CB with effect from 1 October 2013

Existing provisions of section 195(6) of the Income Tax Act, 1961 (the Act) mandate that for any payment to a non-resident chargeable to tax in India, the remitter is required to furnish Form 15CA along with the certificate from a Chartered Accountant in Form 15CB. However, Authorised Dealers have been insisting for Forms 15CB and 15CA for almost all types of payments, whether chargeable to tax or not.

Recently, the Central Board of Direct Taxes has notified new rules amending the existing provisions of Rule 37BB of the Income Tax Rules, 1962 for furnishing information in Forms 15CA and 15CB. According to the notification, Form 15CB is to be furnished in specific cases only, depending on the quantum of payment and the nature of remittance made to the non-resident.

The amended rules would be effective from 1 October 2013.

Key features of the new rules

The information to be furnished in Form 15CA has been categorised as follows:

Part A

If the remittance does not exceed INR 50,000 and the aggregate of such amounts does not exceed INR 250,000 in a financial year, then information in Part A is required to be furnished.

Part B

If the remittance is not chargeable to tax in India and falls under the specified list of payments, then information in Part B would be required. The specified list inter alia includes the following:

  • Indian investment abroad in equity capital (shares)
  • Indian investment abroad in debt securities
  • Indian investment abroad in branches and wholly owned subsidiaries
  • Indian investment abroad in subsidiaries and associates
  • Indian investment abroad in real estate
  • Loans extended to non-residents
  • Payment towards import settlement of invoice
  • Remittance towards business travel
  • Travel for medical treatment
  • Travel for education (including fees, hostel expenses, etc.)
  • Payments for life insurance premiums
  • Payments for maintenance of offices abroad

Part C

For all other remittances not covered in Part A and Part B, information specified in Part C is required to be furnished.
Primarily, Part C of Form 15CA is similar to the earlier Form 15CA with the following key additions:

  • Independent of the applicability of the tax treaty, the details of taxability of remittance under the Act including the relevant section, basis for determining the taxability and tax liability are to be certified
  • The availability or otherwise of the tax residency certificate has to be mentioned
  • Details of remittance in the nature of capital gains are to be given

Further, the abovementioned amendments in Part C of Form 15CA have also been effected in Form 15CB.

SKP’s Comments

  • The current procedure of furnishing Form 15CA electronically on the website designated by the Income Tax Department and thereafter submitting a print-out of the duly executed form along with Form 15CB to the Authorised Dealer shall continue. However, it is relevant to note that though not expressly mentioned, Form 15CB may not be required where a certificate under section 197 or section 195(2)/195(3) of the Act has been obtained. This view is based on the fact that the requirement to report the details of the aforesaid certificates in Form 15CB has now been removed.
  • Part A of Form 15CA is applicable only where payment does not exceed INR 50,000 and aggregate payments do not exceed INR 250,000 in a financial year. Currently, there is no clarity on whether this restriction is for all remittances made by a payer or for each payee. In our view, the same should be applicable for each payee since Form 15CA pertains to a single payee.
  • Currently, it is not expressly provided that there is no requirement to obtain Form 15CB for remittances to be reported under Part A of Form 15CA (as in the case of Part B of Form 15CA). However, in our view, since there is no requirement to report the details of the Accountant, it can be inferred that there is no requirement of obtaining Form 15CB for remittances covered under Part A of Form 15CA.
  • In view of the above, it would be advisable for taxpayers to furnish the information in Part C if they believe there would be any difficulty in estimating the aggregate annual payment since once the form is issued, subsequent amendments are not possible.
  • The new rules could limit the compliance burden and cost in certain cases. However, at the same time, these amendments aim at obtaining more extensive information from the payer.