On August 5, 2013, CBDT (Central Board of Direct Taxes) changed the rules, procedures and forms for making payment to a non-resident from October 1, 2013. The revised forms and procedures will also be applicable for transfer of funds from NRO to NRE account.
While the revised rule reduces the procedures for certain payments, it shifts the onus on the remitter and increases the liability of the Chartered Accountants. It is very important for NRIs as well as Chartered Accountants to know the differences and familiar with the changes. Let’s analyze the changes and its effects.
Segregation of Payment and related procedures:
For any payments made to NRIs from October 1, 2013, the payment is to be segregated into following three payment types/categories. The procedures and forms are different for each category.
- The payment does not exceed Rs. 50,000 and aggregate of such payments does not exceed Rs. 250,000 during a financial year
- The payment is not chargeable to tax and the nature is included in the “Specified List”
- Any other payment
CA Certificate in Form 15CB:
One of the important changes made by the notification was to reduce the requirement of a Chartered Accountant (CA) certificate in Form 15CB for certain payments. From October 1, 2013, CA Certificate in Form 15CB will not be required for payments in first 2 categories. It means No CA Certificate for any payment that does not exceed Rs. 50,000 or aggregate Rs. 250,000 during a financial year or if it is covered in the specified list. The specified list specifies 39 nature of payments and also mentions the purpose code for each nature.
For any other payment, CA certificate in Form 15CB, which is completely revamped, would be required. While Form 15CB kept the basic information the same, such as name, address, country of remittance, amount of remittance, bank details, nature of remittance, etc., it changed other important sections and would require Chartered Accountants to determine taxability of the remittance as per Income Tax Act and DTAA, relevant section of the IT Act or Article of DTAA, TDS rate and tax liability under both IT Act and DTAA, basis of determination or reasons if not taxable.
The information in Form 15CA to be furnished by the remitter electronically to the Income-tax department (www.tin-nsdl.com) and thereafter signed printout of the said form shall be submitted to the authorized dealer (Bank) prior to remitting the payment. While there is no change in the procedures, the Form 15CA has been revised.
The revised Form 15CA has 3 parts. Information in Part A of the Form 15CA is to be furnished if the remittance does not exceed 50,000 or 250,000 in aggregate in a financial year. For Part B of the Form No. 15CA to be used when nature of remittance is covered by the “Specified List”. For any other payment, information in Part C of the Form 15CA is to be furnished.
Part A and Part B of the Form 15CA require basic details of Remitter (name, address, PAN, status), Remitee (name, address, PAN, country) and Remittance (bank details, proposed date, nature, and code of specified list or whether taxable, TDS rate and amount or reasons if not taxable). In addition, the remitter needs to certify that the income is not chargeable under provisions of Income-Tax Act and is not liable for TDS and does not require a certificate in Form 15CB.
Part C of the Form 15CA is to be used when CA Certificate in Form 15CB is received. It has two sections. Section A relates to General Information of Remitter, Remitee, Accountant and AO Order, if any. Section B is to be prepared as per the certificate of the accountant and has all the details as included in the Form 15CB as explained above.
What does this all mean for NRIs?:
For NRIs, who is remitting the money abroad or transferring the funds from NRO account to NRE account, will need to follow the revised rules, furnish the updated forms and complete the new procedures from October 1, 2013.
- If the payment does not exceed Rs. 50,000 or aggregate Rs. 250,000 in a financial year, remittance can be made just by submitting Part A of Form 15CA but NRI will assume all the liability for the transfer.
- Only three natures (i) loans to NRI, (ii) remittance by non-residents towards family maintenance and savings and (iii) remittance towards personal gifts and donations, are useful for normal NRIs that are included in the specified list. For such remittance, NRI will be required to certify of its taxability as mentioned earlier.
- NRI would have to know or learn how to submit the Form 15CA online without the help of a Chartered Accountant if no CA Certificate in Form 15CB to be submitted.
- Any other payment or for transfer from NRO to NRE is not included in the Specified List. As a result, NRIs are to obtain the CA Certificate in revised and detailed Form 15CB and furnish the revised Form 15CA.
- As new procedures shift the onus to Chartered Accountant, he/she may require additional information, may not be aware of the updated procedure or be reluctant to issue the certificate quickly.
- NRIs may also be at the mercy of the bank employees, who may not be aware, not have sufficient knowledge or experience of the new procedures.
- Knowledge/Experience of Chartered Accountant and Liaison with the Bank would be key from October 1, 2013.
- Income Tax department would be able to get all the relevant details (Tax section, DTAA articles, rates etc.) and track the remittances better.
- If No Certificate in Form 15CB, the responsibility of determining taxability would be on the Remitter.
- Chartered Accountants would have to be EXTRA careful as they would now have to research in detail with income tax section and DTAA article number and provide specific detail, thereby increasing the responsibility of determining taxability of remittance. This could increase the time and cost to issue the certificate.
- If you are planning to remit funds outside India or transfer from NRO to NRE, please complete the transfer BEFORE Sept. 27, 2013 (Friday) or be ready for delays and to spend time or money in liaison with CA and bank.
PLEASE NOTE that these rules have been revised and circular has been superseded by another CBDT circular 67/2013 dated Sept. 2, 2013. For the latest information, users comments and my answers/explanations, visit the blog “15CA/CB rules revised Again: 15CA/CB May NOT be required for NRO to NRE transfer”.
The rules and procedures have been revised again. For the latest procedures and requirement as on April 1, 2016, please visit my recent blog 15CB, 15CA Procedures Updated: Understand new procedures applicable from April 1, 2016.