Section 195 of the Income Tax Act, 1961

As per Section 195, any individual or entity making payments to a non-resident or a foreign company must deduct income tax at the applicable rate before making the payment. The remitter must also submit Form 15CA, which details the payment, and for payments exceeding INR 5 lakh, a certificate in Form 15CB, certified by a Chartered Accountant (CA), must be provided. This ensures that the correct tax rate is applied and tax is deducted accordingly.

Importance of Form 15CA and Form 15CB

Forms 15CA and 15CB are vital for reporting foreign remittances under the Income Tax Act, 1961:

 

Form 15CA : A declaration by the remitter detailing the foreign remittance.

 

Form 15CB : A certificate issued by a CA to verify that the provisions of the Income Tax Act and any applicable Double Taxation Avoidance Agreement (DTAA) have been followed.

These forms ensure that taxes are deducted and paid appropriately and that all foreign transactions are reported in a timely manner.

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Applicability of Form 15CA
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Form 15CA is required in the following cases :

 

When any resident or entity makes a remittance to a non-resident or foreign company.

 

When the income is accrued, arises, or is deemed to be received in India, as per Section 5 of the Income Tax Act.

 

Remittances exceeding INR 5 lakh.

Applicability of Form 15CB

Form 15CB is mandatory in the following cases :

 

For taxable foreign remittances.

 

If the payment exceeds INR 5 lakh.

 

If no order or certificate is received from the Assessing Officer.

When is Form 15CA/15CB Not Required?

Form 15CA/15CB is not required in certain cases, including :

 

Specified payments under Rule 37BB of the Income Tax Rules.

 

Remittances exempt from tax under the Income Tax Act or a relevant tax treaty.

 

Remittances that do not exceed INR 5 lakh during the financial year for certain categories, such as education or maintenance.