Form 15CA / 15CB

Practical Issues & Challenges

CA. PRAMOD JAIN

B. COM (H), FCA, FCS, FCMA, LL.B, MIMA, DISA, IP
Shared at
Diploma Course in International Taxation, CITAX ICAI
12th January 2020
 CA. Pramod Jain
OBJECTIVE OF S. 195
 CBDT circular No. 152 dt. 27.11.1974
 Tax is collected at earliest point of time
 There is no difficulty in collection of time
at the time of assessment
 To avoid loss of revenue – as non-
residents may not have any assets in
India from which subsequent recovery
can be made
 CA. Pramod Jain
COMPONENTS OF S. 195
• Any person responsible for paying
• Includes NR, whether or not such NR has
presence in India

• NR not being a company

• Foreign Company

• Interest or any other sum chargeable to tax

• Excludes salary, dividend subject to DDT

• At time of payment or credit whichever is less

• At the rates in force, only if subject matter is
income chargeable to tax
 CA. Pramod Jain

CERTIFICATION IN FORM 15CA & 15CB

Twin Objective (As per memorandum
explaining provisions of the Finance Bill,
2015)

› Ensuring deduction of tax at appropriate

rate from taxable remittances

› Identifying remittances on which tax was

deductible but payer failed to deduct the
tax
 CA. Pramod Jain
BASIC PROVISIONS
•195, 271 - I

•37BB, 37BC, 21AB

•15CA / 15CB / 15CC

 CA. Pramod Jain
COMPLIANCE
•At the time of payment or
credit whichever is earlier
•At TT buying rate (SBI)

•Certification in Form 15CA

and undertaking in Form
15CB

•TDS Returns
 CA. Pramod Jain

195 VS. 194A, 194C, ETC.

S. 195 Other sections, 194A,
194C, 194J, etc
Payer Any Person Specified
Payee Non-Resident Resident
Nature of payment Income chargeable under Specified, whether
IT Act income or not
Minimum Threshold No Threshold Specified
Certificate for Mandatory in specified Not Required
payment cases
Disallowance for non- S. 40(a)(i) S. 40(a)(ia)
deduction
Lower TDS certificate Payer as well as Payee can Only Payee can apply
apply
Requirement of TAN Mandatory Not required in 194-IA,
IB
 CA. Pramod Jain
GROSS OR INCOME
 Ifno application was made u/s 195(2) &
the payer failed to deduct tax, liability u/s
201 to be computed on taxable portion &
not whole sum remitted
 CBDT Inst. No. 2/2014 dt. 26.2.2014
 Disallowance u/s 40(a)(i) to be computed
on the taxable portion & not the whole
sum remitted
 CBDT Circular No. 3/2015 dt 12.2.2015
 CA. Pramod Jain
GROSS OR INCOME
 S. 195(2) is based on ‘principle of
proportionality’ & is attracted only in case
of a composite payment having an
element of taxable income.
 The obligation to deduct tax on
composite payments would be limited
to the appropriate proportion of income
forming part of the gross sum remitted
 GE India Technology Centre (P.) Ltd. [2010] 193 Taxman 234 (SC)
 CA. Pramod Jain
IS WHT ON ALL PAYMENTS?
 Not all. Examples could be:
 Capital payments being gift, loan, repayment of
loan, etc. - Rule 37BB / Schedule III of CAT Rules
 Specifically exempt – dividend u/s 115 O,
salaries
 Revenue payments not chargeable to tax in
India
 Exchange rate fluctuation between date of TDS
i.e. credit to the payee’s account and the
remittance date
 Sandvik Asia Ltd [2012] 49 SOT 554 (Pun ITAT)
 CA. Pramod Jain
DETERMINATION OF TDS
 Check whether payment covered within s.
195
 Other sections for 192, 194LC, 194LD etc
 Based
on documents, determine nature of
payments & applicable provisions
 Certificate u/s 195(2) / 195(3) / 197
 Determine whether payee eligible for
treaty benefits and whether relevant
documents obtained to grant treaty relief
 CA. Pramod Jain
RATE OF TDS
 Ratesin force - section 2(37A)(iii) - For the
purpose of TDS u/s 195, rates in force
mean the beneficial of:
 Rates specified in Part II of First Schedule to
the Finance Act of the relevant year; or
 Rates specified under the applicable DTAA
 Rule 21AB – To claim DTAA benefit, NR to
furnish TRC & Form 10F
 Surcharge & Education cess not to be
added to the tax rate specified under DTAA
 CA. Pramod Jain
S. 206AA W.R. RULE 37BC
 Notapplicable for payments in nature of
interest, royalty, FTS & transfer of any
capital asset, if following details submitted
to deductor:
 Name, e-mail id, contact no
 Address in country or specified territory outside
India of which deductee is resident
 Certificate of he being resident of other country by
Govt. of that country, if law of that country permits
 Tax identification No. and in case no such no. is
available then unique no. on the basis of which
deductee is identified by government of that country
 CA. Pramod Jain
RATE U/S 115A
 In
case of a non-resident taxpayer where
the total income of such taxpayer includes:
 Income by way of Royalty and
 Fees for technical services (FTS) from
Government or an Indian concern after
31.03.1976
 AND which is not effectively connected with
permanent establishment, if any, of the non
resident in India
 Tax shall be levied at the rate of 10% on the
gross amount of such income
 CA. Pramod Jain
PAYMENT TO POA HOLDER
 Where payment is made by assessee to an
individual Resident in India in respect of purchase
of land which belonged to non-residents but rights
therein were assigned unequivocally to said
resident as POA holder, such payment could not be
regarded as payment to non-resident so as to
require TDS u/s 195
 When non-resident himself nominates a particular
agent to whom payment should be made and
pursuant to that direction, the assessee pays the
sum to the agent so nominated, the provisions of s.
195 will apply
 Rakesh Chauhan vs DDIT (International Taxation) [2010] 128 TTJ 116 (CHD)
 CA. Pramod Jain
FORM 15CA
 Itis a Declaration given by Remitter & is
used as a tool by statutory authorities for
collecting information in respect of
payments which are chargeable to tax in
hands of recipient non-resident.
 This is an effective Information Processing
System which is utilized by ITD to
independently track foreign remittances
and their nature to determine tax liability.
 CA. Pramod Jain
FORM 15CB
 Its a certificate from a Chartered
Accountant.
 It is Tax Determination Certificate
where the issuer CA examines the
remittance having regard to
chargeability provisions u/s 5 & 9
along with provisions of DTAA with
Recipient’s Residence Country.
 CA. Pramod Jain

FORM 15CB

WHO CAN ISSUE

FORM 15CB ??
 CA. Pramod Jain
SECTION 195(6)
 As substituted by Finance Act, 2015
 “(6) The person responsible for paying to
a non-resident, not being a company, or
to a foreign company, any sum, whether
or not chargeable under the provisions
of this Act, shall furnish the information
relating to payment of such sum, in such
form and manner, as may be
prescribed.”
 CA. Pramod Jain
SECTION 195(6) - ANALYSIS
Information to be furnished by payer to a NR /
FC
Filing may be required even if payment is not
taxable, say, due to:
 Non-accrual in India (Sec. 9)
 Income that has accrued in India, but has
been expressly exempted (Sec. 10)
 Treaty benefit (Sec. 90)
Filing to be made in prescribed form, manner
(Rule 37BB)
 CA. Pramod Jain
SECTION 271 -I
As inserted by Finance Act, 2015
“If a person, who is required to
furnish information u/s 195(6),
fails to furnish such information, or
furnishes inaccurate information,
the AO may direct that such person
shall pay, by way of penalty, a sum
of Rs. 1 Lakh”
 CA. Pramod Jain
PARTS OF 15CA – RULE 37BB(1)/(2)

A •If aggregate of such remittances does

not exceed Rs. 5 Lacs during the FY

B
•If aggregate of such remittances exceed
Rs. 5 Lacs & order / certificate u/s
195(2)/ 195(3)/ 197 obtained

C
•If aggregate of such remittances exceed
Rs. 5 Lacs & certificate in Form 15CB
obtained from CA

D •If remittance is not chargeable to Tax

 CA. Pramod Jain
APPLICABILITY OF 15CA & 15 CB
Is Remittance
Taxable?
Yes No

Covered under
> Rs.5 Lacsin FY specified
No exemption list
Yes
Yes No

Certificate u/s 15CA– Part A

195 / 197 15CB– NA 15CA– NA 15CA– Part D
Yes No 15CB– NA 15CB– NA

15CA– Part B 15CA– Part C

15CB– NA 15CB– Yes
 CA. Pramod Jain
RULE 37BB
 (3) Notwithstanding anything contained in sub-
rule (2) [Part D of 15CA], no information is
required to be furnished (15CA / 15CB) for any
sum which is not chargeable under the
provisions of the Act, if,—
 Remittance is made by an individual and it
does not require prior approval of RBI as per
the provisions of section 5 of the FEMA read
with Schedule III to the Foreign Exchange
(Current Account Transaction) Rules, 2000;
 Schedule list
 CA. Pramod Jain
FEMA
 S. 5 of FEMA Act
 Any person may sell or draw foreign
exchange to or from an authorised person
if such sale or drawal is a current account
transaction
 Provided that the CG, in public interest and
in consultation with the Reserve Bank,
impose such reasonable restrictions for
current account transactions as may be
prescribed
 CA. Pramod Jain
SCH. III - FOREIGN EXCHANGE (CAT) RULES
 Within limit of USD $250000
 Private visits to any country (except Nepal & Bhutan)
 Gift or donation.

 Going abroad for employment

 Emigration

 Maintenance of close relatives abroad

 Travel for business, or attending a conference or

specialised training or for meeting expenses for meeting
medical expenses, or check-up abroad, or for
accompanying as attendant to a patient going abroad for
medical treatment / check-up.
 Expenses in connection with medical treatment abroad

 Studies abroad
 CA. Pramod Jain
SPECIFIED LIST
Sl. No Purpose code Nature of payment
as per RBI
1 S0001 Indian investment abroad -in equity capital
(shares)
2 S0002 Indian investment abroad -in debt securities

3 S0003 Indian investment abroad -in branches and

wholly owned subsidiaries
4 S0004 Indian investment abroad -in subsidiaries and
associates
5 S0005 Indian investment abroad -in real estate

6 S0011 Loans extended to Non-Residents

7 S0101 Advance payment against imports
 CA. Pramod Jain
Sl. Purpose Nature of payment
No code as
per RBI
8 S0102 Payment towards imports - settlement of
invoice
9 S0103 Imports by diplomatic missions
10 S0104 Intermediary trade
11 S0190 Imports below Rs.5,00,000 - (For use by
ECD offices)
12 SO202 Payment for operating expenses of Indian
shipping companies operating abroad
13 SO208 Operating expenses of Indian Airlines
companies operating abroad
14 S0212 Booking of passages abroad - Airlines
companies
 CA. Pramod Jain
Sl. Purpose Nature of payment
No code as
per RBI
15 S0301 Remittance towards business travel
16 S0302 Travel under basic travel quota (BTQ)
17 S0303 Travel for pilgrimage
18 S0304 Travel for medical treatment
19 S0305 Travel for education (including fees, hostel
expenses etc.)
20 S0401 Postal services
21 S0501 Construction of projects abroad by Indian
companies including import of goods at
project site
22 S0602 Freight insurance - relating to import and
export of goods
 CA. Pramod Jain

Sl. No Purpose Nature of payment

code as per
RBI
23 S1011 Payments for maintenance of offices
abroad
24 S1201 Maintenance of Indian embassies abroad
25 S1202 Remittances by foreign embassies in India
26 S1301 Remittance by non-residents towards
family maintenance and savings
27 S1302 Remittance towards personal gifts and
donations
28 S1303 Remittance towards donations to religious
and charitable institutions abroad
 CA. Pramod Jain
Sl. Purpose Nature of payment
No code as per
RBI
29 S1304 Remittance towards grants and donations to
other Governments and charitable
institutions established by the Governments

30 S1305 Contributions or donations by the

Government to international institutions
31 S1306 Remittance towards payment or refund of
taxes
32 S1501 Refunds or rebates or reduction in invoice
value on account of exports
33 S1503 Payments by residents for international
bidding.
 CA. Pramod Jain
PART D OF 15CA
 To be filled up if the remittance is not chargeable to tax
in India {other than payments referred to in rule
37BB(3)} by the person referred to in rule 37BB(2).
Information required to be furnished under this part:
Remitter Remmitee Currency Bank Remittance
Name Name Country to which Name of Date of
remmittance to be bank remittance
made
Pan Pan Currency Name of Nature of
branch remittance

Tan Address Amount in foreign BSR code Purpose code as

currency of bank per RBI
 CA. Pramod Jain

PART D OF 15CA
Remitter Remmitee Currency Bank Remittance
Address Email & Amount in
mobile no. Indian
currency
Email &
mobile no.
Status
Residential
status
 CA. Pramod Jain
PART A OF 15CA
 To be filled up if the remittance is chargeable to tax in
India and the remittance or the aggregate of such
remittances, as the case may be, does not exceed Rs. 5
Lacs during FY
 In addition to Part D information required:

TDS
AMOUNT PAYABLE BEFORE TDS
AMOUNT OF TDS
RATE OF TDS
DATE OF DEDUCTION
 CA. Pramod Jain
PART B OF 15CB
 Tobe filled up if the remittance is
chargeable to tax in India and the
remittance or the aggregate of such
remittances, as the case may be, exceeds
Rs. 5 Lacs during the FY AND an order /
certificate u/s 195(2)/ 195(3)/ 197 of
Income-tax Act has been obtained from
the Assessing Officer
 CA. Pramod Jain
PART B OF 15CB
INFORMATION REQUIRED IN ADDITION TO
ALREADY MENTIONED IN PART A & D :
A.O. ORDER
Section under which order/certificate has
been obtained
Name & designation of assessing officer who
issued the order/certificate
Date of order/certificate
Order/certificate number
 CA. Pramod Jain
PART C OF 15CA
 To be filled up if remittance is chargeable to tax
and remittance /aggregate of such remittances,
as the case may be, exceeds Rs. 5 Lacs during
FY AND a certificate in Form No. 15CB from CA.
Further details in addition to A, B & D:
Remitter Remmitee Accountant Taxes DTAA*
Principal Principal Name of the Relevant Applicab
place of the place of the accountant section ility of
business business signing certificate applicable DTAA
Area code Status Amount of Relevant
Name of the
taxable DTAA
proprietorship/fir
income
m of accountant
 CA. Pramod Jain

Remitter Remmitee Accountant Taxes DTAA*

Range country to Registration Tax amount Releva
code which no. Of the nt
remittance accountant article
is made of
DTAA
Basis of
determining
Date of
taxable
certificate
income and
tax liability

*DTAA- Double Tax Avoidance Agreement

**This part C of Form 15CA includes all particulars
of Form 15CB in itself.
 CA. Pramod Jain
FORM 15CB - PART A
 Clause A - “name & address of the
beneficiary” of the remittance.
 Beneficiary is the “legal owner” of the
remittance. When the remittance is made
to a third person on behalf of the “legal
owner”, the clause requires details of the
legal beneficiary.
 Applicable DTAA will be decided on the
basis of the residential status of the
beneficiary
 CA. Pramod Jain

FORM 15CB
 Clause B6 - requires nature of the remittance as
per agreement/ document. This involves
characterization of Income and is very crucial in
determination of tax withholding liability and
rate of tax.
 Clause B7 – requires grossing up of income in a
case the remittance is “net of tax” payments
 In “net of tax” agreements, where tax liability is
borne by the remitter, the payment needs to be
grossed up in accordance with the provisions of
section 195A.
 CA. Pramod Jain

FORM 15CB
 Clause B8 - requires computation of tax liability
under provisions of the Income-tax Act (without
considering DTAA)
 Iftaxable, relevant section
 The amount of income and chargeability

 Basis of determining taxable income and tax liability.

 Clause B9 – If income is chargeable to tax in

India and relief claimed in DTAA
 Whether TRC obtained
 Relevant DTAA & its article

 Taxable income as per DTAA and tax liability

 CA. Pramod Jain

FORM 15CB
 Clause B9 – A – If remittance is for Royalty, FTS,
Interest, Dividend, etc (Not connected with PE)
 Article of DTAA & rate as per DTAA
 Clause B9 – B - If remittance is for Business
Income
 Whether liable to tax in India
 If, so basis of rate of TDS

 If, not reason in brief, specifying relevant article of

DTAA
 CA. Pramod Jain

FORM 15CB
 Clause B9 – C – If remittance is on account of
Capital Gain
 Amount of LTCG
 Amount of STCG

 Basis for arriving at taxable income

 Clause B9 – D - If remittance is any other

 Specify nature
 Whether Taxable in India as per DTAA

 If yes, rate of TDS

 If not, reason in brief specifying article of DTAA

 CA. Pramod Jain

FORM 15CB
 Submission of FORM 15CB is mandatory
before the Submitting FORM 15CA.
 FORM 15CA gives details about remittances
rather than FORM 15CB is an assurance as
to whether the applicable provisions of
Income tax act and DTAA are being
followed or not.
 To prefill the details in Part C of Form 15CA,
the Acknowledgment number of e-Filed
Form 15CB should be provided
 CA. Pramod Jain
PROCESS OF FILING 15CB & 15CA
 15CB shall be furnished online by CA
himself w.e.f. 1.4.2016.
 Person filing Form 15CA shall first add CA
under his login details for Form 15CB.
 CA should Download the Java Utility for
15CB, Fill Up and generate xml.
 CA to log in to e-filing portal using user id

 Upload the 15CB xml generated with DSC

procedure. There ends the work of a CA
 CA. Pramod Jain
PROCESS OF FILING 15CB & 15CA
 Step 1: Client should log in to its account and in
“work list” option under main menu click “For
Your Information section” and see the list of
returns e-filed.
 Step 2: 15CB e-filed by CA will appear in first.
Select the form and download the Ack. No file of
15CB and also 15CB PDF file (password for PDF
file is PAN & DOB/DOI)
 Step 3: Then under “'e-file” option select
“Prepare and Submit online forms other than
ITR” Select 15CA in it.
 CA. Pramod Jain
PROCESS OF FILING 15CB & 15CA
 Step 4: Client to validate the DSC file and on
choosing the DSC file it will ask for which Part of
15CA to be chosen Part -A/ B/ C/ D.
 Step 5: For options of C, 15CB of CA is required.
So if C is selected it will ask for the 15CB e-filed
acknowledgement no.
 Step 6: On entering the 15CB e-filed
acknowledgement no, 15CA is populated fill the
necessary details then submit.
 Step 7: Finally under “My Account” section in
“View” option one can see the 15CA e-filed.
 CA. Pramod Jain
DOCUMENTS FOR 15CB
For characterization of transaction
 Agreement / Purchase order & Invoice
 Transaction details and correspondence
 Technical advice (if obtained / required)
 Any other proof of services rendered (e.g.
copy of report furnished by the NR / FC, etc.)
Payee’s certificate that it has No PE and / or
Business Connection in India
SBI’s TTBR certificate
 CA. Pramod Jain
DOCUMENTS FOR 15CB
If availing DTAA benefit
 Valid TRC
 Form 10F (if TRC doesn’t contain prescribed
details – discussed earlier)
 Payee’s certification of its DTAA entitlement
and Beneficial ownership of payments made
to it
Indemnification: Not a statutory requirement, but
may be considered on a case-to-case basis
 CA. Pramod Jain
PRACTICAL CHALLENGES
 TRC received in foreign language
 TRC not available
 Available for earlier year(s), but not for current year
 TRC applied for, but not available on date of
deduction
 SKAPS INDUSTRIES (AHD.): DTAA benefits cannot be
denied merely due to non-availability of TRC. When
NR has substantiated its residential status by way of
sufficient and reasonable documentary evidence,
requirement of furnishing TRC would be persuasive
and not mandatory
 CA. Pramod Jain

PRACTICAL CHALLENGES
 Validity of TRC:
 Where tax year is a calendar
year
 TRC valid for multiple years
 Year in which remittance is
made, is different from that
in which tax was deducted
 Payable / Paid
 Sec. 195 read with S. 206AA
/ S. 90
 CA. Pramod Jain

PRACTICAL CHALLENGES
 Countries with no TRC
 Where the Issuing Authority
is not IRS / Tax office:
 Corporate regulatory
authority
 Business license as a TRC
 Certificate issued by an
'Association'
 R. 37BC(2)(iv) – TIN / Unique
No. by which Govt of that
country identify him as
resident
 CA. Pramod Jain

PRACTICAL CHALLENGES
› Characterization
 Inability to characterize the transaction, say,
due to absence of a valid (or sufficiently
detailed) agreement, purchase order, and / or
any other document
 Conflicting court decisions as regards
characterization
 Composite payment
 CA. Pramod Jain

PRACTICAL CHALLENGES
› Can the C.A., while issuing Form 15CB, simply rely
upon the ‘No PE certificate’ issued by Payee
› What if there is a (reported) adverse decision for the
payee, albeit for a different AY, wherein it has been
held to have an Indian PE
› Where payee has an Indian PE, but the remittance is
not attributable to such PE – as certified by the Payee
› Issuing Form 15CB for sensitive transactions (due to
its quantum and / or complexity). Eg. remittance of
purchase price of shares of an investment SPV, sold
by a NR
 CA. Pramod Jain

PRACTICAL CHALLENGES
› Payment is made to a country other than RS of
payee
› Where the transaction price does not represent
FMV as per S. 50CA of the Act
› Where banker disagrees with Classification Code
selected by C.A., and code suggested by banker
could conflict with characterization of transaction
› Determination of ‘beneficial ownership’: TRC
constitutes sufficient evidence for accepting
beneficial ownership (as per Circular 789, dt. 13
Apr. 2000) – Relied upon in Indostar Capital (Bom.)
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 CA. Pramod Jain

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