Outward remittance from india to us

This query is : Resolved

Querist : Anonymous

Querist : Anonymous (Querist)

07 July 2016 Hi Experts,

Can we make outward remittance of $50000 per month from Indian company to US company for business purpose. What are the legal compliances?

ASHWANI DHANUKA

ASHWANI DHANUKA (Expert)
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07 July 2016 "Business Purpose" is a very broader term. Give more specific reason for remittance. Annual Limit of outward remittance is $250,000.00 in a FY

Querist : Anonymous

Querist : Anonymous (Querist)

07 July 2016 Services business as in where the Indian company collects the revenue generated by US company in India and then transfer it to US company on monthly basis.

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Asha Kanta Sharma online

Asha Kanta Sharma

(Expert)
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09 August 2024 Yes, an Indian company can make outward remittance to a US company for business purposes, including for services rendered. However, this process involves compliance with several legal and regulatory requirements. Here’s a detailed overview of the compliance framework and steps you need to follow:

### 1. **Foreign Exchange Management Act (FEMA) Compliance:**

- **Regulatory Framework**: The primary legislation governing outward remittances from India is the Foreign Exchange Management Act, 1999 (FEMA), administered by the Reserve Bank of India (RBI).
- **Permissible Remittances**: Under FEMA, remittances for business purposes, including payments for services, are generally permitted. The Indian company must ensure that the remittance falls under permissible categories such as payment for import of services, royalties, or technical fees.

### 2. **Reserve Bank of India (RBI) Guidelines:**

- **Liberalized Remittance Scheme (LRS)**: LRS applies to individuals rather than companies, so it's not directly relevant for company remittances. However, companies must comply with RBI regulations for business remittances.
- **Approval and Documentation**: Ensure compliance with RBI guidelines. For business remittances, the company should ensure proper documentation and approvals, if necessary. Documentation typically includes:
- **Invoice**: A detailed invoice from the US company for the services rendered.
- **Contract**: A copy of the contract or agreement with the US company.
- **Proof of Payment**: Bank statements or other proof showing the transaction details.

### 3. **Tax Compliance:**

- **Tax Deducted at Source (TDS)**: Before making the remittance, check if any TDS is applicable. As per the Income Tax Act, the Indian company might be required to deduct TDS on payments made to non-residents, including payments for services. The applicable rate depends on the nature of the service and the Double Taxation Avoidance Agreement (DTAA) between India and the US.
- **Form 15CA/15CB**: If TDS is applicable, you need to file Form 15CA and obtain Form 15CB from a Chartered Accountant. These forms are required for remitting money abroad and are used to declare that the appropriate TDS has been deducted.

### 4. **Foreign Exchange Management Regulations:**

- **Purpose of Remittance**: Ensure that the purpose of the remittance is clearly defined and matches the business purpose stated in the agreement.
- **Remittance Limits**: Although $50,000 per month is generally permissible, ensure that the total annual remittance does not exceed the limits prescribed under FEMA and RBI regulations.

### 5. **Bank Compliance:**

- **Bank Documentation**: When initiating the remittance, provide the bank with all necessary documentation, including the contract, invoice, and proof of payment.
- **Foreign Exchange Declaration**: The bank may require you to submit a declaration or certification regarding the purpose and nature of the remittance.

### Summary of Steps:

1. **Verify Purpose**: Confirm that the purpose of the remittance is permissible under FEMA regulations.
2. **Deduct TDS**: Calculate and deduct any applicable TDS.
3. **File Forms**: Submit Form 15CA and obtain Form 15CB if TDS is applicable.
4. **Prepare Documentation**: Gather and prepare all necessary documents, including the invoice, contract, and proof of payment.
5. **Bank Processing**: Submit the documentation to your bank and complete the remittance process.

By adhering to these guidelines, you can ensure that the outward remittance from your Indian company to the US company is compliant with Indian regulations and smoothly processed.