Wednesday 14 August 2013

New forms notified for furnishing information on remittances made to non-residents

   


Under the provisions of section 195(6) of the Income-tax Act, 1961 (“Act”), any person responsible for making a remittance to a non-resident (“NR”) or a foreign company (“F Co”) is required to furnish the specified information electronically (in Form 15CA) to the Income-tax department and thereafter, submit a signed copy to the authorized dealer prior to making the remittance.


The Central Board of Direct Taxes (“CBDT”) has issued a notification[1] amending the Income-tax Rules, 1962 (“Rules”)[2] on August 5, 2013 related to the format and disclosures to be made in the Form 15CA. The amendment will come into force from October 1, 2013.


Key amendments made


As per the amended Rule, the key changes in the prescribed forms, ie, Forms 15CA and 15CB are as follows:


A. New Form 15CA – Part A, B and C


· The old Form 15CA (which was primarily divided into two parts ie A and B) has now been replaced by a new Form 15CA which is segregated into three parts - Part A, Part B and Part C, and the payer is required to furnish details in each part (as applicable) depending upon the remittance made:


- The information in Part A has to be furnished where the remittance made to an NR or F Co. does not exceed INR 50,000 per transaction and the aggregate of such remittances made during the financial year does not exceed INR 250,000.


- The information in Part B has to be furnished where the remittance is not chargeable to tax and covered in the specified list as provided in the notification. Click here for the notification.


- The information in Part C has to be furnished where the remittances are other than those specified in Part A and B. Such information has to be furnished after obtaining a certificate from a Chartered Accountant (“CA”) in Form 15CB, or a certificate from the Assessing Officer (“AO”) under section 197 of the Act (ie the AO after being satisfied that income is liable to lower or nil deduction of tax at source, grants a certificate to this effect), or an order from the AO under section 195(2) or 195(3) of the Act (ie, under section 195(2), the AO determines the portion of salary payment to a NR on which tax is required to be withheld and issues an order to this effect, and under section 195(3), the AO issues certificate stating nil withholding of tax on certain incomes received on which tax is otherwise required to be withheld).


· The disclosures under each part in addition to the particulars mentioned under the old form are listed below for ready reference:


- Under Part A, in addition to the details of remitter and remittee as stated under Part A of the old form, disclosures regarding remittance made and tax deducted at source (“TDS”) have to be also furnished. The details required to be disclosed about the accountant as was required earlier has now been done away with in the new form. In case tax is to be withheld on the remittance the Permanent Account Number (“PAN”) of the remittee is also required to be furnished mandatorily, else the provisions of section 206AA of the Act would apply requiring withholding to be made at a higher rate. Also, if the remittance is not chargeable to tax, the reasons need to be furnished.


- Under Part B, in addition to the details of the remiiter and remittee, disclosures regarding nature of remittance specifying the relevant code from the specified list given in the explanation to the amended Rule and country of residence of the remittee (if available) has to be furnished. Most of the items covered in the explanation are those that would normally be liable to tax in India and it appears that the intention of specifically including such remittances is to provide the Revenue with an ability to track and monitor such payments as well. Some of the payments covered are:


- Indian investment abroad in equity/ debt/ branches of wholly owned subsidiaries and associates/ real estate


- Loans extended to NRs’


- Payment for operating expenses and freight on imports, in case of shipping and airline companies


- Remittance towards travel, including business travel, pilgrimage, medical treatment, education


- Payments for life premium, freight insurance and other general insurance


- Remittances towards personal gifts, donations, by NRs’ towards family maintenance and savings, payment or refund of taxes


- Refunds or rebates or reduction in invoice value on account of exports


- Payments by residents for international bidding


Another, noteworthy aspect is that the other details required under Part B of the old form are now mentioned under Part C of the new form.


- Part C is divided into two sections, ie, A and B, akin to Part A and Part B of the old form. Under Part A, in addition to the details of the remitter, remittee and accountant, the disclosure regarding obtaining certificate from AO has to be furnished. The details of the remittance made have been done away with in the new form. Further, it specifically prescribes mandatory application of provisions of section 206AA of the Act, if PAN of the remittee is not available.


Under Part B, in addition to the details required in Part B of the old form, certain disclosures have been specified in respect to the nature of remittance, viz, liability to tax under the Act, under the relevant Double Taxation Avoidance Agreement (“DTAA”), details of tax residency certificate (“TRC”) (if relief is claimed under DTAA), and remittance on account of capital gains bifurcated into short-term, long-term and the basis of arriving at taxable income.


· The form would have to be filed electronically by the payer on the official website of the Income-tax department and thereafter a printout of the form needs to be submitted to the authorized dealer as specified under Foreign Exchange Management Act, 1999. All this needs to be complied with before making the remittance.


B. New Form 15CB


· Form 15CB is not required to be furnished in case the remittance is covered under Part A or Part B of the new Form 15CA.


· In addition to the particulars certified by a CA in the old form, following particulars are now required to be certified:


- Taxability of the remittance under the Act (without considering the relief under DTAA);


- Particulars with respect to obtaining TRC, where relief under DTAA has been claimed;


- Remittance on account of capital gains has been bifurcated into short-term, long-term and the basis of arriving at taxable income.

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