India’s Changes to Information Reporting for Non-Residents Set to Boost Ease of Doing Business
By Dezan Shira & Associates
Editor: Tracie Frost
The Indian government has released changes to the information reporting process for payments made to non-residents. The changes, which were notified during December, were made effective January 4, 2016, and seek to create a balance between reducing the compliance burden and collecting sufficient information.
Previously, Rule 37BB of the Income Tax Rules required that any Indian person making any taxable payment to a non-resident must provide the details on Form 15 CA (declaration of remitter). The Finance Bill, 2015 amended Section 195 of the Income-tax Act to require that the person responsible for paying any sum to a non-resident individual or foreign company, whether taxable or not, which is not specifically exempted in the tax code, must provide the details of the transaction. This requirement went into effect June 1, 2015.
The new rules, effective January 4, 2016, clarify when information is required to be reported, what information must be reported, and what part of Form 15 CA must be used to report that information.
No information is required to be furnished for non-taxable amounts paid from an Indian concern to a non-resident if the remittance is made by an individual and the remittance does not require prior approval from the Reserve Bank of India. Nor is information required to be furnished if the remittance is on the “specified list” provided in Rule 37BB. Specifically, the rules add five special transactions to the previous “specified list” of 28, making the new list 33 transactions long. The list can be found here and includes certain India investments abroad, loans extended to non-residents, and advance payments against imports.
In cases where information is required to be reported, the person responsible for paying to a non-resident should fill out the Form 15 CA and submit it electronically. The new rules specify how to fill out the Form 15 CA as follows:
Part A – Taxable Transactions Under 500,000 Rupees:
If the payment during the financial year does not exceed 500,000 rupees and is subject to tax, the payee must fill out the information in Part A of Form 15 CA.
Part B – Taxable Transactions Over 500,000 Rupees:
If the payment during the financial year exceeds 500,000 rupees and is subject to tax, the payee must fill out the information in Part B of Form 15 CA after obtaining a certificate from the assessing officer in accordance with Section 195 of the Income-tax Act.
Part C – Taxable Transactions Over 500,000 Rupees:
If the payment during the financial year exceeds 500,000 rupees and is subject to tax, the payee must fill out the information in Part C of Form 15 CA after obtaining a certificate in Form 15 CB from a chartered accountant.
Part D – Non-taxable Transactions:
If the payment during the financial year is not subject to tax and does not fall under one of the exemptions listed above, the payee must fill out the information in Part D of Form 15 CA.
In general, the information required to be reported includes the remitter and remittee’s names, permanent account numbers (PAN), tax deduction and collection account numbers (TAN), addresses, email addresses, and phone numbers. In addition, the amount payable, banking details, date of remittance, nature of remittance, and any details related to taxes already deducted must be included on the Form 15 CA depending on which part the remitter is required to fill out.
While some questions still linger about the implementation of the new rules, overall they do ease information reporting rules and enhance the ease of doing business in India – an area where the Indian government has been focusing much of its reform agenda.
Asia Briefing Ltd. is a subsidiary of Dezan Shira & Associates. Dezan Shira is a specialist foreign direct investment practice, providing corporate establishment, business advisory, tax advisory and compliance, accounting, payroll, due diligence and financial review services to multinationals investing in China, Hong Kong, India, Vietnam, Singapore and the rest of ASEAN. For further information, please email email@example.com or visit www.dezshira.com.
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