Volume 2, Issue 7

22nd April, 2009

Tax Alert
Changes in Compliance for Remitting Funds out of India

The Central Board of Direct Taxes (CBDT) has recently amended the Income-tax Rules, 1962 (the Rules) dealing with the compliance requirements in relation to withholding tax provisions in India. Included among various amendments, is the introduction of new Rule 37BB of the Rules dealing with the compliance requirements for making remittance to a non resident / foreign company. The new Rule 37BB shall be effective from 1st July 2009. It would therefore apply to all remittances made on or after 1st July, 2009.

The new Rule 37BB provides that the person making a remittance to a nonresident / foreign company is required to obtain a certificate from a Chartered Accountant in Form 15CB. In addition to most of the details that are presently required to be certified, the said form is different from the existing C.A. Certificate issued under section 195 of the Income‐tax Act, in the following aspects:‐

Particulars Existing Form New Form
BSR Code of the remitter’s bank to be specified No Yes
Date of the remittance Proposed month /date to be specified Proposed date of the remittance to be specified
Nature of the remittance as per agreement/ document to be
No Yes
Reference to “Nil / Lower withholding tax” order procured from the tax department along with the details to be specified No Yes
Serial No. of the Certificate Not required Required

Further, the person remitting to a non‐resident / foreign company is required to furnish information in Form 15CA to the Income tax department. The information in Form 15CA shall be furnished electronically to the website designated by the Income‐tax department and thereafter a signed print‐out of the said form is required to be submitted to the Income‐tax department prior to remitting the payment. Form 15CA requires additional information to be furnished by the remitter as compared to earlier undertaking especially, in respect of the following:

Particulars Existing Undertaking provided to the bankers by way of Annexure A New Undertaking to be provided to the income tax department
TAN of the remitter No Yes
PAN of the recipient of the remittance to be specified No Yes
Status of the recipient and the remitter
No Yes
Additional details regarding the Accountant
issuing Form 15CB
No Yes
Date of Certificate – 15CB No Yes
Serial No. of the Certificate – 15CB Not required Required
Entire details of Form 15CB to be specified No Yes

Thus, with the introduction of these new compliance requirements for making remittances, it seems that the primary objective of the tax department is to capture all the information relating to overseas payments, with a view to detecting evasion of taxes in India. Compliance with the new requirements may seem to be a herculean task for the remitter and needs to be properly planned and taken care of. Further, Earlier the person making the remittance was only required to rely on the CA certificate which would certify the correctness of the amount/ nature and rate of tax withheld. However, since all the details of Form 15CB are require to be specified in Form 15CA, the primary onus for furnishing the details regarding the remittance shifts to the person making the remittance. Also, the recipient would be required to obtain a PAN in spite of not being taxable in India.