Volume 2, Issue 12

3rd July, 2009

Tax Alert
New rules relating to remittance of money out of India
The Central Board of Direct Taxes (CBDT) had introduced a new rule (Rule 37BB) vide Notification No. 30 dated 25th March, 2009; drastically amending the procedural formalities to be complied with for making payments to a non resident / foreign company (Please see SKP alert Vol. 2, Issue 7 dated 22nd April, 2009).

The new rule, which is effective from 1st July 09, provides that any person  making remittance to a non‐resident / foreign  company is required to obtain a  certificate from a

Any person making remittance to a nonresident / foreign
company is required
to electronically file
form 15CA.

Chartered Accountant in Form 15CB. Also a declaration in Form 15CA is to be furnished (both electronically and in physical format) by the remitter for every overseas payment before making the remittance.

Further to the above notification, the CBDT issued circular No. 4/2009 dated 29th June 2009, giving guidance and clarifications in respect of the procedure laid down in the notification. In brief, with effect from 1st July, 2009, the procedure given below will have to be followed for making remittances from India:

  • The remitter has to fill an online Form 15CA on the site www.tin‐nsdl.com and obtain an acknowledgment number whichwill be generated by the system upon uploading of the form.
  • The uploaded Form 15CA thereafter would have to be printed and physically signed (by the person authorised to sign the return of income or a person so authorised by him in writing). The Form 15 CA and Form 15CB are to be submitted in duplicate to the Reserve Bank of India / authorised dealers (Bankers) through whom the payment is to be remitted.
  • The circular further clarifies that all the required documents are to be submitted to the Reserve Bank of India / Bankers instead of Income Tax authorities.
  • The Reserve Bank of India / Bankers would, in turn, submit the documents to the Income Tax authorities.
  • In case the remitter has obtained a certificate from his Assessing Officer regarding the rate at or the amount on which the tax is to be deducted, the remitter will not be
    required to obtain a certificate from an accountant in Form 15CB. However, in such cases, the remitter is required to furnish the information in Form 15CA along with the copy of the certificate from the Assessing Officer to the Reserve Bank of India /Bankers.

The Form 15CA requires some administrative details such as phone number and email ID of the remitter and the recipient. The remitter would also have to mention the serial number mentioned in the certificate issued by the Chartered Accountant (Form 15CB).

Q 5: How will imports be taxed under GST ?

The reasons for the amendment are not far to seek. It seems that in many cases, documents / information from the Bankers were not reaching the tax authorities. Also, it was difficult for the tax authorities to track all foreign payments on a manual basis. It was also reported in a financial daily that tax authorities were unhappy with the way certificates were issued by a few Chartered Accountants without consideration of proper facts and application of the law.

Both CGST and SGST will be levied on import of goods and services into the country.

Hence, in order to align this, the tax authorities are now focusing on withholding taxes on foreign payments with the primary objective of capturing all the information relating to overseas payments and to avoid evasion of taxes in India. The tax authorities not only gain in terms of withholding tax revenues but also boost their kitty on account of corporate tax payable by
the Indian company by virtue of disallowance of expenses due to non‐deduction of withholding taxes!

In light of the above recent developments, increased focus by the Indian tax authorities and stringent consequences of non‐compliance with withholding tax requirements on overseas payments, it would be imperative to properly plan the overseas remittances and the consequent withholding tax compliances in a way that queries raised by the tax authorities are minimized if not totally avoided.