TDS on foreign payment 15CA + Consequences
An summary of Form 15CA
What is Form 15CA?
Form 15CA is an essential declaration for anyone sending money abroad from India. It ensures that the remittance complies with the Income Tax Act of 1961, allowing the Government to track and regulate these transactions for tax purposes.
Before remitting to a nonresident or foreign company, the form must be submitted online. However, some remittances are exempt or have lower withholding tax rates, as outlined in the Income Tax Act or Double Taxation Avoidance Agreements (DTAA).
Applicability of TDS on foreign payments
- No forms are required when the remittance amount is not chargeable under applicable tax laws.
- When the remittance is exempt from the specified list, only Form 15CA part D must be submitted.
- Suppose the remittance is less than five lakh rupees in a particular financial year. In that case, only part A of Form 15CA must be submitted.
- If the remittance exceeds five lakh rupees, the duly filled out part C of forms 15CA and 15CB must be submitted.
- Suppose the remittance exceeds five lakh rupees and the certificate under section 195(3)/section 195(2) of Income Tax has been received. In that case, it is necessary to submit part B of form 15CA.
Parts of Form 15CA
The form is divided into four sections that must be completed per the present scenario. The four components are as follows:
- Part A: To be filled irrespective of whether the remittance is taxable or not, and the total amount does not exceed Rs. 5 lakh in a financial year.
- Part B: To be filled out once the Certificate under Sections 195(2), 195(3), or 197 of the Income Tax Act has been received from the Assessing Officer.
- Part C: To be filled when a remittance or its aggregate exceeds Rs. 5 lakh in a single financial year and is liable for tax.
- Part D: This is filled when the remittance is not taxable under domestic law.
When is Form 15CA not required?
Form 15CA is not required when the remittance is made using the payment list stated in Rule 37BB of the Income Tax Rules.
- When the individual sending the payment does not need Reserve Bank of India approval under Section 5 of the Foreign Exchange Management Act (FEMA), 1999.
- Form 15 CA is also unnecessary if the remittance is exempt from tax under the Income Tax Act or an applicable tax treaty.
- When an individual and the total amount remitted during the financial year do not exceed five lakh rupees, the transfer is not for a foreign tour or payment for purchasing any foreign asset.
- When an individual makes a remittance to continue education abroad, the amount should be no more than the RBI’s limit.
Procedure to File TDS on foreign payments Online
To file Form 15CA online using the e-filing Portal, follow these steps:
1. Log in to the e-filing Portal using your user ID and password.
2. Once logged in, go to your Dashboard and then select e-File > Income Tax Forms > File Income Tax Forms.
3. On the File Income Tax Forms page, look for and choose Form 15CA. Alternatively, you can type Form 15CA into the given search box.
4. On the Instructions screen, click “Let’s Get Started.”
5. After choosing Let’s Get Started, Form 15CA will be shown. Select the appropriate section and enter the required information. Then click Proceed.
6. Verify the details on the Preview screen before pressing the e-Verify button.
7. Clicking Yes confirms your intent to submit. Verify the information on the Preview screen and then click the e-Verify button.
8. You will then be redirected to the e-Verify page, where you can finish the verification procedure.
Specified payments where Form 15CA is not required
Purpose code as per RBI | Nature of Payment |
S0001 | Indian investment abroad -in equity capital (shares) |
S0002 | Indian investment abroad -in debt securities |
S0003 | Indian investment abroad -in branches and wholly owned subsidiaries |
S0004 | Indian investment abroad -in subsidiaries and associates |
S0005 | Indian investment abroad -in real estate |
S0011 | Loans extended to Non-Residents |
S0202 | Payment- for operating expenses of Indian shipping companies operating abroad. |
S0208 | Operating expenses of Indian airline companies operating abroad |
S0212 | Booking of passages abroad -Airline companies |
S0301 | Remittance towards business travel. |
S0302 | Travel under basic travel quota (BTQ) |
S0303 | Travel for pilgrimage |
S0304 | Travel for medical treatment |
S0305 | Travel for education (including fees, hostel expenses etc.) |
S0401 | Postal services |
S0501 | Construction of projects abroad by Indian companies including import of goods at project site |
S0602 | Freight insurance – relating to import and export of goods |
S1011 | Payments for maintenance of offices abroad |
S1201 | Maintenance of Indian embassies abroad |
S1202 | Remittances by foreign embassies in India |
S1301 | Remittance by non-residents toward family maintenance and savings |
S1302 | Remittance towards personal gifts and donations |
S1303 | Remittance towards donations to religious and charitable institutions abroad |
S1304 | Remittance towards grants and donations to other Governments and charitable institutions established by the Governments. |
S1305 | Contributions or donations by the Government to international institutions |
S1306 | Remittance towards payment or refund of taxes. |
S1501 | Refunds or rebates or reduction in invoice value on account of exports |
S1503 | Payments by residents for international bidding |
Importance of Form 15CA
Form 15CA is a declaration required when a resident pays a nonresident. It guarantees that the payment follows the Income Tax Act of 1961 and is properly reported. This form allows correct and timely tax collection on these payments.
Before paying a nonresident, fill out Form 15CA and submit it online through the income tax department’s website. This method allows the tax department to track overseas payments and ensure that the correct taxes are paid in compliance with the Income Tax Act.
What are the consequences of not filing Form 15CA?
1. Tax authorities can impose fines for not filing Form 15CA. These fines range from INR 10,000 to INR 1,00,000, depending on how severe and long the non-compliance is. For example, if a business misses filing Form 15CA for a foreign payment, it might face a fine of INR 10,000 per missed filing. Repeated violations or more significant amounts could lead to fines of up to INR 1,00,000 per transaction.
2. Besides fines, due to non-compliance, interest charges may apply to the unpaid tax amount. The interest rate is usually 1% per month or part of a month on the outstanding tax. So, if a business fails to file Form 15CA and does not pay taxes on a foreign remittance of INR 1,00,000, it could incur an interest charge of INR 1,000 per month until the tax is paid.
3. If a business continues to ignore Form 15CA filing requirements despite warnings, legal action may be taken, which could lead to fines or imprisonment for those responsible.
Conclusion
Forms 15CA and 15CB ensure accountability and efficiency in foreign remittances by providing a straightforward approach for both taxpayers and regulatory authorities. By understanding how to file these forms and the exemptions under the Income Tax Act, individuals and businesses can navigate international transactions smoothly while complying with regulations.
We have reached the end of this post. Please share your queries with us in the comment section below.
FAQs
1. Is there any time limit for submitting Form 15CA?
Ans: No, there is no time limit for filing Form 15CA. However, it must be filed before the remittance is made.
2. How should the Form 15CA be e-verified?
Ans: Form 15CA should be e-verified using DSC or EVC. If you have registered with DSC, you must use it to e-verify.
3. Can the Form 15CA be withdrawn?
Ans: Yes, Form 15CA can be withdrawn within 15 days after submission.
4. What types of documentation are necessary when filing Form No. 15CA?
Ans: Invoice, tax residence certificate (TRC), agreement between the parties, and Form 10F.
