U S Sharma (glidor@gmail.com) (21063 Points)
Replied 24 April 2011

sec 195 will be applicable here, no exemption limit , TDS applicable from zero

1 Like

CA Vipin Garg (Assistant Manager) (83 Points)
Replied 25 April 2011

Hi I totally agree with Mr. U.S. Sharma Ji, the only section applicable is 195 and TDS will be deducted on the whole amount because no exemption limit is allowed in sec 195.

1 Like

CA Saroj Kumar (Keen to learn something new every moments) (2588 Points)
Replied 25 April 2011

u can follow this link

/articles/sec-195-tds-on-nri-4548.asp

1 Like

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 26 April 2011

FORM 15CA & 15CB (REMITTANCES TO NON-RESIDENTS UNDER SECTION 195 OF THE INCOME-TAX ACT)

Posted on September 29, 2010 by Mukesh Goel

Section 195 of the Income-tax Act, 1961 mandates deduction of income-tax from payments made or credit given to non-residents at the rates in force. The person making the remittance to a non-resident needs to furnish an undertaking (in Form 15CA) accompanied by a Chartered Accountants Certificate in Form 15CB. The purpose of the undertaking and the certificate is to collect taxes at the stage when the remittance is made as it may not be possible to recover the tax at a later stage from non-residents.

What is Form 15CA?

Form 15CA is an undertaking by the remitter furnished in an electronic mode at the website of the Tax Information Network (https://www.tin-nsdl.com) giving details of the proposed remittance and tax deducted at source in accordance with the provisions of section 195(6) of the Income-tax Act, 1961.
This information should be furnished after obtaining a Certificate in Form 15CB from a Chartered Accountant. The print out of the Form 15CA (furnished online) should be signed by authorized signatory and submitted to the bank prior to remitting the payment along with certificate of a Chartered Accountant in duplicate in Form 15CB.
The fields marked with (*) are mandatory.
Select the values from the drop down wherever provided.
Each transaction detail should be filled in separately.

Guidelines in filling up form 15CA

The following guidelines may be kept in mind while furnishing Form 15CA

Remitter :

Permanent Account Number (PAN) and Tax Deduction and Collection Account Number (TAN) allotted by the Income Tax Department should be mentioned. TAN is mandatory in cases where-

- tax has been deducted or will be deducted at source;

- the remitter has obtained an order under section 195(2) of the Income-tax Act from the Assessing Officer.

In case an invalid PAN and/or TAN is filled in by the remitter, the Form will not be generated.
In case the remitter does not have a TAN, it is mandatory to quote PAN of the remitter.
PAN of the remitter should invariably be given. However, the same is mandatory if status of entity is Company or Firm. If PAN is not given in such cases, the remitter will not be allowed to generate the Form.
Details in at least two address fields for remitter should be mentioned.
Name of the entity should be mentioned in the “Name of remitter” field.
No value is to be provided in Area code, AO type, Range code & AO number. The fields will be entered by the system after validating the PAN and/or TAN.
Email id and mobile no., if any, should be provided.

Recipient of remittance:

Complete address of recipient of remittance, separated by coma, should be provided.
PAN, allotted by the Indian Income Tax Department should be mentioned.
If status of entity is “company”, then provide type of company i.e., “domestic” or “other than domestic”.
In the field “Principal Place of Business”, the country of tax residence of the recipient of the remittance should be mentioned.

Information for accountant :

Enter name of the Chartered Accountant in the field “Name of the accountant”.
Details in at least two address fields should be mentioned.
Date of certificate should not be a future date.
Registration no. should be numeric.
Details of accountant are not required if point no.15 is selected i.e. any order u/s 195(2)/ 195(3)/ 197 of the Income-tax Act has been obtained from Assessing Officer.
Certificate number is an alphanumeric field.

Guidelines for Part B of the Form 15CA (Particulars of remittance and TDS) :

Provide the values as per the accountant certificate obtained in Form 15CB.
In case name of the country is not available in drop down list, select value “other” from the drop down and provide name of the country.
In case currency name is not available in drop down then select value ”other” from the drop down and provide name of the currency.
Proposed date of remittance should be current date or a future date.
Amount of TDS should be less than amount of remittance.
Actual amount of remittance after TDS should be less than amount of remittance.
BSR code of the bank through which the remittance is made should be mentioned.
Rate of TDS as per DTAA (if applicable) should be mentioned upto two decimal places.
Amount should be mentioned upto 2 decimal places.
Select any one out of fields 12, 13, 14 and 16. One form is to be filled for one type of remittance.
Details of “responsible person” should be mentioned for verification.
If no tax has been deducted then value “0.00” should be mentioned in “Amount of TDS” field (foreign currency and Indian Rupees.)
Value for “rate of deduction as per the Income-tax Act” should be “0.00” if no tax has been deducted and “amount of TDS in Indian and foreign currency” should be “0.00”.

Generation of Form 15CA :

After filling up the information, click “submit”. On submission of details if system shows any errors, rectify and re-submit the form.
A confirmation screen with all the data filled by the user will be displayed. The same can be either confirmed or edited.
On confirmation, a filled up Form 15CA with an acknowledgement number will be displayed. Print out of the Form should be taken, signed and submitted prior to remitting the payment.
Form 15CA can be re-printed by selecting the re-print option. For re-printing, please enter “acknowledgement no.”, “PAN” and/or “TAN” mentioned in the Form.

What is 15CB?

The person making the payment (remitter) needs to obtain a certificate from a Chartered Accountant in Form 15CB. The format of Form 15CB has been prescribed by Central Board of Direct Taxes (CBDT).

Common discrepancies noted while submitting Form 15CA and 15CB to the bank :

These are some of the common errors that could be avoided to ensure proper submission of these forms to the bank prior to making the remittance.

Form 15CA and/or 15CB is not provided prior to the proposed remittance.
Details stated in Form 15CA/ 15CB do not tally with each other or with the details in the A2 form and/or supporting documents.
Form 15CB is unsigned/ un-stamped : Form 15CB has to be signed and stamped by the Chartered Accountant clearly mentioning the registration number and certificate number.
Unsigned 15CA : The print out of the undertaking Form (i.e. Form 15CA) should be physically signed by the remitter.

1 Like

CA Ishaan (Chartered Accountant) (453 Points)
Replied 26 April 2011

Hello,

I would like to differ. That is because, the querist has only mentioned that the US citizen is a non-resident. Other points have not been considered.

The US citizen, if he is non-resident as per the Income Tax Act, and is not assessable to tax under the Act, then there is no question of TDS As per the ruling of Hon'ble Bombay High Court in CIT v. Cooper Engg. Ltd. (1967) 68 ITR 457 , person paying any sum to a non-resident is not liable to deduct TDS if the sum is not liable to taxed in India. According to Supreme Court ruling in Transmission Corporation of A.P. Ltd. and Another v. CIT (1999) 239 ITR 587, whether payment of sum to non-resident is chargeable to tax under the Act, is to be considered. The sum may be income or income embedded therein. I fso, tax is required to be deducted on the said sum; the income is to be computed on the basis of various provisions of the Act including provisions for computation of business income, if the payment is a trade receipt. Hence first see if he come within the taxing powers of the Income Tax Act,1961

According to Section 9(1)(vii), Fees for taxable services is income 'deemed to accrue or arise in India' if paid by Govt. or resident. But if they are used for a business/profession carried on outside India OR for any source of income outside India.

15CB and 15CA will still have to be filled out. The certificate from CA and undertaking as per new format prescribed vide. Circular No. 10/2002 dated 9.10.2002 will also be applicable(now, the No-Objection certificate is not required by RBI)

In short, TDS is applicable only if Section 9(1)(vii) comes into operation. Both are to be considered simultaneously, it is foolish not to look at the taxability of the payments and just deduct TDS, when the payment may not be taxable.

Thanks and Regards

CA. Anuj Gupta (Practices in NRI Int.Tax FEMA TP FDI/FIPB & FCRA) (7024 Points)
Replied 26 April 2011

Originally posted by : Bhaskar jyoti Patowary

Hello everybody, I have a query regading TDS. An indian company wants to pay fees for technical services to one US citizen in US$. Now,
   1. Can the company deduct tax under 194J or any other section will applicable to it?
   2. Is the Threshhold limit of30000/- also applicable here?
   3.U/s 195 what is the TDS rate applicable here as per Finance Act or Sec 90 or 90A ? Should the company deduct tax in this case?

As per Income Tax Act the TDS is required to be deducted u/s 195 [in terms of section 9(1)(vii)]and there is no threshold limit u/s 195. The rate shall be 10.5575% as per sec 115A or 20% as per sec 206AA(in case of NO PAN).Here I am presuming that the US citizen is non -resident as per Income Tax Act,1961.

Yes the Company should deduct TDS in the present case although there may certian benifits available in DTAA but I think many aspects needs to be taken care before using the provisions of Treaty.

Anuj

09810106211

2 Like

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 26 April 2011

@ Ishaan

An indian company wants to pay fees for technical services to one US citizen in US$

hope the query is clear now with relevent replies.

CA Ishaan (Chartered Accountant) (453 Points)
Replied 26 April 2011

@ U S Sharma

and how did you divine the exact nature of that arrangement. As far as I see, the querist has nowhere mentioned if the exceptions of 9(1)(vii) have been attracted or not.

The Indian company may want to do anything, what is relevant is whether what it is wanting to do is taxable.

Hope your doubts are cleared

Thanks and Regards

Bhaskar jyoti Patowary (Querist) (35 Points)
Replied 27 April 2011

Thanks to all for providing me such valuable information. Now I am facing difficulties regarding the following –

1. The U.S. citizen to whom the fee for technical services has to be paid is non-resident as per the Income Tax Act. He has provided technical services in India to the Indian company and the Indian company has no business connection outside India. Now is it necessary to see whether the deductee is assessable to tax or not? I think it is neither the objective of Sec.195 nor it is the duty of the deductor to see whether the deductee falls under the tax net. Sometimes it may be difficult to find out whether he is assessable to tax under the Act. If in case such this, the recipient applies to A.O. in Form 15D can the company make payments with deducting tax? if we do not deduct tax what suporting documents should be collected? If tax is not deducted can the accountant raise objection while giving 15CB?

2. While prescribing TDS rates Section 195(h) provides that “fees for technical services payable by Government or an Indian concern in pursuance of an agreement made by non-resident with the Government or the Indian concern and where such agreement is with an Indian concern, the agreement is approved by the Central Government or where it relates to matter included in the industrial policy, the agreement is in accordance with the policy- Where the agreement is made on or after June 1, 2005 the TDS rate is 10%.”

Now -

a) Is it mandatory to have an agreement between the parties?

b) If there is an agreement, should the said agreement be approved by the Central Govt.?

c) If there is an agreement and if it is not approved by the central govt., then what is the TDS rate applicable here? Is it 10% or any other rate?

Sometimes the recipient may ask the deductor to bear the TDS and remit the full payment. Again section 248 says that “where under an agreement or other arrangement, the tax deductable on any income, other than interest, u/s 195 is to be borne by the person by whom the income is payable, and such person having paid such tax to the credit of the central govt. claims that no tax was required to be deducted on such income, he may appeal to the commissioner (Appeals) for a declaration that no tax was deductable on such income”.

Keeping in view this section lets assume a situation. X (P) Ltd has to pay $10000 fees for technical services to an NRI or ‘other than domestic company’ and the agreement entered between them is not approved by the central govt. x (P) Ltd remits the entire $10000 to the recipient and pays $1030 say 45320/- (1030 X 44=Rs 45320) as TDS to the central govt. out of its own pocket. At the end of the F.Y. the tax liability of X (P) Ltd. on its income is say 40000/-. Here X (P) Ltd makes the following arrangement-

Tax payable Rs 40000/-

Less: TDS Rs 45320/-

Refund Rs 5320/-

Can the company do so?

Plz help.

U S Sharma (glidor@gmail.com) (21063 Points)
Replied 27 April 2011

Originally posted by : Ishaan
	@ U S Sharma and how did you divine the exact nature of that arrangement. As far as I see, the querist has nowhere mentioned if the exceptions of 9(1)(vii) have been attracted or not. The Indian company may want to do anything, what is relevant is whether what it is wanting to do is taxable. Hope your doubts are cleared Thanks and Regards

@ Ishan

technical services and royalty? perhaps i need to steady more on subject

thanks

CA Ishaan (Chartered Accountant) (453 Points)
Replied 28 April 2011

Hello,

If you deduct tax where no tax is payable, then it would be wrong because you are unneccarily inconviniencing the deductee, your own cost will go up, since the deductee may add it to the cost and recover it from you...

Thanks and Regards

1 Like

Arun A P (Learning thro experience) (64 Points)
Replied 28 April 2011

Originally posted by : Bhaskar jyoti Patowary

Hello everybody, I have a query regading TDS. An indian company wants to pay fees for technical services to one US citizen in US$. Now,
   1. Can the company deduct tax under 194J or any other section will applicable to it?
   2. Is the Threshhold limit of30000/- also applicable here?
   3.U/s 195 what is the TDS rate applicable here as per Finance Act or Sec 90 or 90A ? Should the company deduct tax in this case?

Hi guys this is my post in CA Club India. Hope will serve our society from here on.

Answer to the question:

1. U cannot deduct the TDS for foreign remittance under Sec. 194J

2. No Threshold limit for TDS deductible u/s Sec. 195.

3 Follow the link:

https://www.taxmann.com/fileopener.aspx?stype=1&searchid=3005

Thanks & Regards