The significant changes under the amended Rules vide notification dated 17/12/2015.are:
No Form 15CA and 15CB will be required to be furnished by an individual for remittance which do not requiring RBI approval under its Liberalised Remmittace Scheme (LRS)
Further the list of payments of specified nature mentioned in Rule 37 BB which do not require submission of Forms 15CA and 15CB has been expanded from 28 to 33 including payments for imports. code non taxable.xlsx
A CA certificate in Form No. 15CB will be required to be furnished only in respect of such payments made to nonresidents which are chargeable to tax and the amount of payment during the year exceeds Rs. 5 lakh. Requirement of e-Form 15CB & filling up of e-Form 15CA-Part A/B/C/D w.e.f. 1 st April 2016
For those small payment cases, if the amount of payment or the aggregate of such payments, made during the FY does < Rs. 5 lakh- NO 15CB required
For those having exemption u/s 197; or an order u/s 195(2) 195(3); NO 15CB required
For those small payment cases, if the amount of payment or the aggregate of such payments, made during the FY does < Rs. 5 lakh- NO 15CB requiredFor those big payment cases, if the amount of payment or the aggregate of such payments, made during the FY does > Rs. 5 lakh; Exemption given for 33 cases; 15CB required
any sum which is not chargeable under the provisions of the Act; NO 15CB required
Few common transactions and applicability of TDS u/s 195:
TDS to be deducted on payment by a firm to its non-resident working partner
Commission paid to overseas Agents:
Commission earned by NR would not be taxable in India under Domestic law if all services rendered by NR outside India (i.e. NR do not have any business connection in India as per Sec 9(1)(i)) and income is not received in India. If it is taxable under Domestic Law, we need to claim the benefit of DTAA in which it is not taxable.
Clearing and Forwarding (C& F) Charges paid Non-resident: In the case of ACIT v Leaap International (P.) Ltd. 15 taxmann.com 251, Honorable Chennai Tribunal held that payment made to foreign companies partly towards freight charges for moving the goods and partly for transportation for clearing/forwarding at the foreign ports and the remittances were for services rendered outside India and the companies to whom payments were made did not have any branches or PE in India; and the payments were made in accordance with the RBI's circular as also the CBDT Circular No. 10/2002 dated 9-10-2002 and, therefore, the payments were not liable for deduction of tax under section 195.
Loan Arranger Fees: Arranging of a loan cannot be equated with lending of managerial or consultancy services at all because Arranger did not provide any advisory or counselling services. The Arranger was not involved in providing control, guidance or administration of the credit facility nor it was involved in day-to-day functioning of the assessee in overseeing the utilisation or administration of the credit facility. It was not in charge of entire or part of the transaction of arranging services, hence, it cannot be termed as managerial or consultancy services within the meaning of Fee for Technical Services prescribed u/s 9(1)(vii). Hence, Fee paid to non-resident for arranging loan is neither interest nor 'FTS' and not liable to TDS in India.
Reimbursement of expenses: If the main expenditure is not chargeable to tax in India, then reimbursement of expenses will also be not chargeable to tax. Similarly, if the main expenditure is chargeable to tax in India then the reimbursement of expenses shall also be chargeable.
Royalty/FTS for non residents are taxable in India if sourced in India.
Royalty/ FTS income is taxable in India if service is used/ utilized in India. Place of rendering service not relevant
Section 9(i)(vi)/(vii) of the Act deem royalty/FTS to accrue or arise in India where it is:
Payable by the Government
Payable by resident unless it is payable in respect of any right, property or information used or services utilized:
for the purpose of or in the business or profession carried on by such resident outside India or
for the purpose of making or earning any income from any source outside India
Payable by non-resident only if it is payable in respect of any right, property or information used or services utilized:
for the purpose of or in the business or profession carried on by such non-resident in India or
for the purposes of making or earning any income from any source in India.
DTAAs having a restrictive scope (i.e., “make available” criteria)
Some of the DTAAs which India has entered into (US, UK, Canada, Australia, Finland, Singapore, etc.) provide for a restrictive definition of the term “FTS”/“FIS”.
the nature of “FTS” (under the “make available” criteria)
NOT in the nature of “FTS”
Engineering services (including the sub-categories of bioengineering and aeronautical, agricultural, ceramics, chemical, civil, electrical, mechanical, metallurgical and industrial engineering);
Computer software development;
Environmental and ecological services;
Communication through satellite or otherwise;
Energy conservation ;
Exploration or exploitation of mineral oil or natural gas;
Consulting services in relation to review of hydrocarbons, analysis and review of data maps;
Training in the use of simulators;
Technical assistance and training to enable the recipient to manufacture aluminium foils;
Technical plans, designs and information to enable the recipient to execute and install water features
Services provided by overseas lead managers for managing a GDR issue;
Standard telecom service;
Quality assurance assessment and certification activities;
Reviewing project documentation and providing expert opinion
Providing commercial and industrial information;
Updation of a market study;
Project monitoring services;
Grading and certification reports
Clinical or bio-analytical studies.
Airborne survey and providing high resolution geophysical data
Services of reinsur
Payment for software whether royalty or not?
As held in Infrasoft’s case by Delhi HC: What is transferred is neither the copyright in the software nor the use of the copyright in the software, but what is transferred is the right to use the copyrighted material or article which is clearly distinct from the rights in a copyright. It is accordingly held that what has been transferred is not copyright or the right to use copyright but a limited right to use the copyrighted material and does not give rise to any royalty income. Thus, the same shall come under the purview of royalty when payment is made for copyright or right to use copyright of software. Accordingly off-shelf saleable Software which are sale in CD/DVD/ pen drive NOT A royalty.
Caselaws:Infrasoft software royalty TRC Certificate required for claiming relief of DTAA.
However, in India, a person has to be eligible to claim the beneficial provisions of such DTAA. As per section 90(4) of the Act, a person would be eligible to claim the beneficial provisions of the DTAA if he has obtained a Tax Residency Certificate from the government of the country of which he is a resident.
Form 15CB is a certificate issued by the Chartered Accountant certifying that TDS provisions are compiled while making foreign remittance. Whereas, Form 15CA is a certificate cum declaration given by the payer that the amount of TDS deducted is as per Income Tax Act, 1961.
So for any foreign payment you need to check the applicability of form 15CB and 15CA. First you will have to obtain 15CB from a practising CA and then you need to file form 15CA. All the process of filing of form 15CB and 15CA are online.