Hassle-Free Payments to Non-Residents

Businesses today access numerous services and facilities from outside India to provide services within the country. In return for the services/ facilities, remittances have to be made to the non-resident parties. Currently, remittances to non-residents should be accompanied by an undertaking in Form 15CA, and a chartered accountant should certify the applicability of withholding tax through Form 15CB.

Recently, the Central Board of Direct Taxes amended the procedure for remittance to a non-resident. The simplified reporting requirements and procedure, applicable from October 1, 2013, will impact a large number of taxpayers and relieve them of compliance requirements in certain cases.

NO FILING

According to the new rule, both forms need not be filed if the remittance is not chargeable to tax, or if it falls under the exhaustive list of specified transactions such as investment in equity share capital, debt securities, in branches/ subsidiaries, travel for pilgrimage/ medical treatment/ education, and so on.

REVISED FORM 15CA

The revised Form 15CA (to be furnished by the remitter) is now divided into two parts, corresponding to whether the remittance exceeds the prescribed limit or not. Part A is used when the sum chargeable to tax does not exceed Rs 50,000 per transaction and the aggregate of payments during the financial year does not exceed Rs 2.5 lakh. Part B is for remittance exceeding the prescribed limit. Form 15CA requires mandatory insertions if the Permanent Account Number of the remittee is not available.

REVISED FORM 15CB

Taxpayers need not obtain Form 15CB if the jurisdictional tax officer has issued an order for lower or nil tax deduction. However, where the certificate is required, additional details should be provided including whether a Tax Residency Certificate has been obtained from the remittee, taxable income determined in case of capital gains, taxability under domestic laws and the relevant tax treaty.

PRACTICAL ISSUES

The CBDT has tried its best to liberalise the compliance procedure for remittances outside India. However, a few practical issues remain unresolved. When deciding whether to fill Part A or Part B of Form 15CA (along with Form 15CB), payers may have difficulty determining whether the aggregate payments to be made during the financial year will exceed the limit of Rs 2.5 lakh or not. It is also not clear whether Form 15CB should be obtained for past payments if the aggregate transaction value exceeds Rs 2.5 lakh during the year, and Part A of Form 15CA was filled in the past with the understanding that future aggregate payments would not exceed the limit.

The liberalised procedure is a welcome move towards a simplified compliance regime for remittances outside India. However, the onus of proof is on taxpayers where it is claimed that the transaction is not chargeable to tax.

Business Line, New Delhi, 23-09-2013