Form 15 CB and Form 15 CA
Section-195 of the Income Tax Act relating to withholding tax on every remittances made to a Non-resident if it is chargeable to tax under Income tax Act. This provision of the Income Tax Act requires every person to perform the following responsibilities:
- Section -195(1) provides that any person responsible for paying to Non-resident any sum chargeable under income tax act, deduct income tax thereon at the rates in force before making such payments. The person paying may be Resident or Non-resident and whether or not such Non-resident has a residence or place of business or business connection in India; or any other presence in any manner whatsoever in India.
- Section-195(6) of ITA provides that the person responsible for paying to Non-resident any sum whether or not chargeable under ITA, shall furnish the information relating to such payment in the form and manner provides in Rule 37BB of Income tax rules in Form 15 CA and Form 15 CB.
- The objective of this provision is to ensure that all the payments to Non-resident from India Whether made by Resident or Non-resident should be recorded as per the procedure and requisite compliance must be made under the provisions of Income tax Act.
- No information is required to be furnished for any sum which is not chargeable under the Income tax Act and if that sum is remitted by Individual and it does not require prior approval of Reserve Bank of India as per Section-5 of Foreign Exchange Management Act (FEMA) or covered under list of 33 items as mentioned in sub rule 3 of Rule 37BB of the Income Tax Rules.
- The information is to be furnished trough two form called Form 15 CA, to be furnished by the payer electronically under digital signature as per procedure, format and standard prescribed by the authorities and Form 15 CB, to be furnished by the Chartered Accountants verified electronically and handed over to the Authorised Dealer (Bank) for remitting money to Non-resident.
- The Authorised Dealer (Bank) shall allowed the remittances to Non-resident Only after submitting Form 15 CA or Form 15 CB or both by the payer. Additionally, the Authorised Dealer shall also furnish a quarterly statement for each quarter of the financial year in Form 15 CC containing to consolidated data of Form 15 CA and Form 15 CB received by him during each quarter, to the portal of Income tax department.
- This provides cross verification of all remittances at the Income tax portal to ensure that no reportable remittances should not escape from the eyes of the tax authorities.
- Form 15 CA which is to be submitted by the payer has four Parts.
Part-A of Form 15 CA if the amount of payment or aggregate amount of such payments, as the case may be, made during the Financial year does not exceed INR 500,000;
Part-B of Form 15 CA for payments other than the payments covered in Part-A, if certificate of lower deduction under Section–197 or Section-195(2) or Section-195(3) of the Income Tax Act is applicable;
Part-C of Form 15 CA is applicable when remittances are taxable and Chartered Accountants certificate in Form 15 CB is required to furnish along with Form 15 CA by the payer;
Part-D of Form 15 CA is applicable where the remittances are not chargeable to tax under the provision of Income tax Act and also not covered under the Exemption as provided by Sub rule 3 of Rule 37BB of the Income Tax Rules.
- Form 15 CB is required to be furnished by Chartered Accountants as certificate of withholding tax as applicable to the specific remittance for each remittance which is chargeable to tax under the provisions of Income tax Act. Based on this Form 15 CB certificate, the payer shall file Part-C of Form 15 CA.
- Any non-compliance of these provisions will evoke huge penalized and even the payer may be required to pay the tax, interest, or penalty on behalf of Non-resident payee. The expense may also be disallowed as business expenses of the payer in the event of non-compliance of this provision of the Income Tax Act in India.
We, DSRV and Co LLP Chartered Accountants, are providing this services to our clients for the last 20 years. Very recently, there is a lot of amendments in International tax rules and domestic tax rule relating to foreign remittances and compliance of withholding tax provision as per Section-195 of the Income Tax Act and more than 90 tax treaties which India is presently having with tax jurisdictions.