Tax Bulletin - Vol.1 Issue 4

Payments to non residents - amendments in requirements for furnishing information

The Ministry of Finance has, vide Notification dated 16th December, 2015 amended Rule 37BB of the Income Tax Rules, 1962. This amendment will come into effect from 1st April, 2016. The amendment is in relation to payments made to non-residents. Some of the changes made bring significant relief to business houses as they do away with the requirement of onerous documentation at the time of making payments for various transactions.

 

This tax alert highlights the significant amendments made.

  1. Form 15CA and CB will not be required to be furnished by individuals for remittances which do not require RBI approval under its Liberalised Remittance Scheme (LRS). It may be noted that the present limit under the LRS is US$ 250,000 per person per year.
  2. List of payments not requiring the submission of Form 15CA and CB has been extended to 5 important additional transactions. The addition to the existing list is as under:
    1. Advance payment against imports;
    2. Payment towards import - settlement of invoice;
    3. Imports by diplomatic missions;
    4. Intermediary trade;
    5. Imports below Rs. 5,00,000/- (For use by ECD offices).
  3. Individuals making payments to non-residents will be required to comply with Rule 37BB if the payment exceeds Rs. 5 Lakh during the year and therefore, they would need to furnish a certificate in Form 15CB from a Chartered Accountant. 

    Previously, there were two parts to the Form 15CA - Part A and Part B. The remitter had to fill and upload the form as applicable. Part A of the Form 15CA was to be filled and uploaded if the remittance was chargeable to tax in India and the amount did not exceed Rs. Fifty Thousand and the aggregate remittance during the year did not exceed Rs. Two Lakh Fifty Thousand. From the 1st of April, 2016 Part A of Form 15CA will have to be filled by individuals only if the remittance aggregates to Rs. 5 Lakh during the year. However, the remittance should not be to a foreign company.

    The amendment has bifurcated the Form 15CA further into Part B, C and D. Earlier, Part B was to be filled up if the remittance was chargeable to tax and the aggregate remittance exceeded Rs. Two Lakh Fifty Thousand. After the amendment is effective, this Part will be required to be filled for remittances not exceeding an aggregate of Rs. Five Lakh or where the lower or nil deduction certificates u/s 195(2), 195(3) or 197 of Income Tax Act has been obtained from the Assessing Officer.

    Part C is to be filled up for remittances exceeding Rs. Five Lakh. In such cases, Form 15CB is required from a Chartered Accountant. Part D of Form 15CA is to be filled in cases where the remittance is not taxable under the provisions of the Income-tax Act.

MCA’s comments

It is an appreciated move as it once again shows the Government’s commitment towards reducing unnecessary paperwork and compliance on the part of the tax payers and banks as well. The information sort is bifurcated in various parts as well, making the information collection more effective and useful. The additional transactions included in the specified list will bring a huge sigh of relief for importers all across the nation. Now, they will be spared from having to comply with the Rule 37BB and from having to produce various certificates of Form 15CB for multiple payments for an import. This will definitely result in smoother import transactions.

The pro-active action taken by the Finance Ministry in the past few days needs to be lauded as the same will go a long way in making life simpler for the citizens of India. Many more such steps are needed to be taken to ensure that the government’s initiatives like “Make in India” succeed. Unless doing business in India is made easier, not only foreigners but even Indians will find it unattractive to start new business activities in India. We look forward to more such amendments from the tax department. One only wishes that the amendments brought about by the latest notification were made effective from 1st January, 2016 instead of from 1st April, 2016.

We hope this information was useful and of interest to you.

Tax Bulletin - Vol.1 Issue 5
Tax Bulletin - Vol.1 Issue 3

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