2. Applicability of Section 195 – Key Points

2.1 Who is a non-resident?

Per Section 6 of the Act, a person is resident in India if certain stay criteria are met; otherwise non-resident.
Hence, payments or transfers (for example, an NRO account to NRE account) to non-residents (or foreign companies) may fall under Section 195 if chargeable.

2.2 What payments are covered?

Section 195(1) covers “any sum (other than salary) payable to a non-resident … or to a foreign company, which is chargeable under this Act”. Examples: interest, royalty, fees for technical services, capital gains, dividends, business income etc.

2.3 No threshold for deduction

There is no minimum threshold for deduction under Section 195: if the sum is chargeable to tax under the Act, TDS must be deducted regardless of amount. However, for the purposes of foreign remittance compliance via Form 15CA/Form 15CB, a threshold of ₹5 lakh (in a financial year) is relevant.

2.4 Application for lower or nil deduction

Under Section 195(2)/(3), the payer can apply to the Assessing Officer for determination of the appropriate proportion of sum chargeable, or the non-resident can apply for a certificate for lower/nil deduction under Section 197.

2.5 Consequences of non-compliance

If payer fails to deduct tax under Section 195 or fails to deposit it or fails timely:

• Interest at 1.5% per annum from date of deduction to date of deposit (if TDS deducted but not deposited)

• Penalty equal to the tax amount may be levied

• Disallowance of expenditure in case of business (if deduction not made) and addition may be made.

3. Forms 15CA & 15CB – Overview

3.1 What are they?

• Form 15CA: A declaration by the remitter (person responsible for remittance or payment) providing information to the Income-tax department about payments or transfers to non-residents/foreign companies.

• Form 15CB: A certificate given by a Chartered Accountant certifying that the tax deductible under Section 195 and comparable DTAA provisions has been correctly determined and that the remittance or transfer is in compliance.

3.2 Why required?

Banks / authorised-dealers (AD) before remittance will insist on tax-compliance — they must check whether tax under Section 195 has been deducted or not. Reporting through Form 15CA/Form 15CB provides tax-authority oversight of such funds.

3.3 Recent revisions

As per recent update (May 2025) in Rule 37BB:

• The list of specified payment-natures where Form 15CA/Form 15CB not required (previously 28 items) expanded to 33 items including some payments for imports.

• Form 15CB will be required only for payments made to non-residents which are taxable and where payment exceeds ₹5 lakh.

• If no RBI (or authorised-dealer) approval is required under Foreign Exchange Management Act, 1999 (FEMA) for the remittance, then for some cases forms may not be required.

4. When Forms 15CA/15CB Apply – Detailed Matrix

4.1 Payments or transfers to non-residents/foreign companies – taxable in India

If a resident (or NRI remitting from NRO to NRE) is making a payment/transfer to a non-resident (or foreign company) and the payment/transfer is chargeable to tax in India under the Act (or DTAA) — then:

• Regardless of amount, Form 15CA is required.

• If amount (or aggregate in that FY) exceeds ₹5 lakh and payment is taxable, then Form 15CB is required before Part C of Form 15CA.

• If amount ≤ ₹5 lakh: only Part A of Form 15CA is required (no Form 15CB).

4.2 Payments or transfers to non-residents – not chargeable to tax

If the payment/transfer is not chargeable to tax in India (for example because of exemption, or DTAA, or other reason) then:

• Only Form 15CA (Part D) required (no Form 15CB) provided the remittance/transfer nature qualifies.

4.3 Specified payments under Rule 37BB where forms not required

Rule 37BB lists payments/transfers of certain nature (RBI purpose-codes) where Form 15CA/Form 15CB are not mandatory: e.g., Indian investment abroad, loans to non-residents, imports under certain codes, travel/education/medical remittances etc.
Therefore, if a remittance falls under those non-mandatory categories, the remitter may skip Form 15CA/Form 15CB (though bank may still ask for justification).

4.4 Offshore remittance threshold vs forms-threshold

Important: The ₹5 lakh threshold is for taxable payments/transfers only and for requiring Form 15CB (plus Part C of Form 15CA). The global remittance threshold under FEMA may differ—these are separate compliance streams.

5. Process for Forms 15CA & 15CB – Step-by-Step

5.1 Determine applicability

• Ascertain whether payment/transfer is to a non-resident/foreign company.

• Determine whether payment/transfer is taxable in India (under Act/DTAA) via Section 195.

• Determine amount of payment/transfer (or aggregate) in that financial year (exceeds ₹5 lakh or not).

• Determine whether remittance/transfer falls under “specified payments” (Rule 37BB) where forms may not be required.

• Determine whether payment/transfer requires lower/nil deduction certificate under Section 197/195(2)/(3).

5.2 Form 15CB (if applicable) – CA certificate

If required (payment/transfer taxable & > ₹5 lakh) then get CA to issue Form 15CB. The CA needs to certify:

• Details of remitter and remittee (legal status, PAN, etc).

• Nature of remittance/transfer, country of remittee, currency, amount.

• Rate of TDS under Section 195 or DTAA.

• That tax deduction and payment will be/has been made.

• That non-resident/foreign company does/does not have permanent establishment in India or taxable presence etc.
  User-manual notes: Form 15CB is “event-based” – i.e., required for each remittance that meets the condition.

5.3 Form 15CA – Remitter’s declaration

Form 15CA is filed online via the e-Filing portal of the Income-tax department. It is divided into parts:

• Part A: Payment/transfer or aggregate remittances not exceeding ₹5 lakh during the financial year (taxable).

• Part B: Payments/transfers exceeding ₹5 lakh for which certificate under Section 195(2)/(3)/197 has been obtained.

• Part C: Payments/transfers exceeding ₹5 lakh which are taxable — and Form 15CB available.

• Part D: Payments/transfers not chargeable to tax under the Act.

5.4 Filing steps

1. Download user-manual (available on portal).

2. Remitter compiles requisite information: remitter details (name, legal status, PAN, address, phone/email), remittee details (name, address, legal status, country), remittance/transfer details (country, currency, amount in INR, nature, proposed date), remitter bank details (name, branch, BSR code) etc.

3. If Form 15CB is required: CA prepares certificate; digital signature (DSC) mandatory.

4. Remitter logs into e-Filing portal → e-File → Other Forms → Form 15CA. Select appropriate Part, fill details, upload XML (if required) or online fill form.

5. On successful submission, acknowledgement appears and email sent to registered email.

6. Submit to bank/authorised-dealer as proof. Bank may check: whether TDS required; if yes, TDS deducted and deposit made; whether forms submitted; whether purpose-code is one of exemptions under Rule 37BB; whether PAN / TAN / bank details aligned.

7. Note: Form 15CA can be withdrawn within 7 days of filing (some sources mention) though you should verify current portal.

5.5 Checklist 

• Remitter: name, legal status, PAN, address, principal place of business, phone/email.

• Remittee: name, legal status, address, principal place of business.

• Remittance/transfer: country, currency, amount in INR, nature of remittance/transfer, proposed date.

• Remitter bank details: name, branch, BSR code.

• Nature of payment/transfer: to determine if taxable/chargeable under Act/DTAA.

• Documents: Remittee’s Tax-Residency Certificate (TRC) of country of residence; Form 10F (if required) confirming non-resident’s statement of facts (e.g., no PE in India).

• For Form 15CB: CA’s certificate, CA’s membership number, DSC.

• Purpose-code of remittance/transfer (for bank/AD) and check if purpose-code falls under Rule 37BB list of no-form-requirement.

• Aggregate remittances during FY to check if exceed ₹5 lakh.

• TDS deduction details (if applicable): rate, deposit challan, TAN of remitter, PAN of remittee, etc.

• Filing steps: utility/portal; upload; acknowledgement; submission to bank.

• Withdrawal option (if applicable).

• Retain copies of forms, acknowledgements, CA certificate, bank submission proof.

• For quarterly/annual monitoring: track remittances/transfers to non-residents to determine thresholds and compliance.

6. Exemption / No-Form Cases – Rule 37BB & Others

6.1 Rule 37BB specified payments

Detailed list of purpose-codes indicating remittances/transfers for which Forms 15CA/15CB not required. Example categories: Indian investment abroad (equity, debt, branches, subsidiaries), loans extended to non-residents, advance payment of imports, imports by diplomatic missions, travel/education/medical remittances etc.

If a remittance/transfer falls under one of these nature-codes and the relevant conditions are satisfied (for example no taxability in India, etc), then forms may not be required. But the bank/AD will still require you to demonstrate that.

6.2 Other cases where Form 15CB not required

• If remittance is taxable but payer has obtained a certificate under Section 195(2), 195(3) or Section 197 (lower/nil deduction) – then Form 15CB may not be required; only Part B of Form 15CA applies.

• If aggregate of remittances/transfers during FY does not exceed ₹5 lakh and payment is chargeable – then only Part A of Form 15CA (no Form 15CB).

• If payment/transfer is not chargeable to tax under the Act (or under DTAA) then only Part D of Form 15CA; no Form 15CB.

6.3 Cautions

• Even if payment/transfer is not taxable, you cannot assume automatically “no form” – need to verify whether remittance nature qualifies under Rule 37BB.

• Bank/AD may still request forms even if not strictly required — be ready to provide justification.

• The aggregate remittance threshold of ₹5 lakh pertains only to taxable payments/transfers.

• DTAA benefits: check whether non-resident’s country has a treaty, and whether taxability is mitigated; still requires proper certificate/15CB if taxable.

7. TDS Under Section 195 – Integration with Forms 15CA/15CB Process

Even though your focus as a chartered-accountant firm may be the forms, you must integrate advice regarding TDS under Section 195:

7.1 Deduction obligation

The payer/remitter must:

• Obtain TAN under Section 203A if required.

• Obtain PAN of remittee (non-resident) and ensure valid. If PAN not furnished, higher rate under Section 206AA may apply.

• Deduct TDS at the applicable rate at time of credit/payment (whichever is earlier).

• Deposit TDS by 7th of next month of deduction via Challan 281.

• File quarterly TDS return (Form 27Q) by due dates.

• Issue certificate to non-resident (Form 16A) within 15 days of due date of TDS return.

7.2 Rates

Rates depend on nature of income and may be governed by Finance Act or DTAA. The payer must pick whichever is more beneficial to payee (non-resident) – lower of treaty rate or domestic rate.

7.3 Integration with Forms 15CA/15CB

When payment/transfer is taxable and subject to TDS under Section 195:

• Before remittance/transfer, Forms 15CA/15CB must be filed (if conditions met) so bank can comply.

• CA in Form 15CB should verify correct TDS rate and that deduction will occur.

• Remitter should ensure deposit of TDS and maintain evidence.

• If non-resident obtains lower/nil certificate: incorporate that in CA certificate and Part B of Form 15CA.

8. Recent Legal Updates & Key Dates (2024-25)

• Update in May 2025: Rules related to submission of Forms 15CA/15CB revised — list of payments not requiring forms expanded; Form 15CB threshold clarified.

• Online e-Filing of Form 15CA updated 

• Clarifications emphasise that payments/transfers even if not taxable must be reported (via Form 15CA) unless specifically exempted under Rule 37BB.

9. Practical Challenges & Advisory Notes for Practitioners

9.1 Bank/Authorised Dealer scrutiny

Banks will check forms 15CA/15CB (if required), assess whether TDS under Section 195 should have been deducted, check the purpose-code, check whether payment/transfer falls under exceptions. If non-compliant, bank may withhold remittance or ask for retrospective documents.

9.2 Multiple remittances during financial year

Aggregate remittances/ transfers may cross the ₹5 lakh threshold even if each individual payment is smaller. You must monitor year-to-date amounts to decide whether you have to obtain Form 15CB.

9.3 Nature of payment and taxability

Often remitters are unaware whether payment/transfer is chargeable to tax in India (e.g., royalty, technical service fee, import of services, reimbursement of expenses). The CA certificate (Form 15CB) must deal with whether the payment is taxable, and if yes at what rate.
If payment/transfer is not taxable (e.g., genuine reimbursement or covered under Rule 37BB exception), then only Form 15CA Part D applies. But you must document bona-fides (nature of services, contract, DTAA, PE issues) so that bank has justification.

9.4 Documentation for non-resident (remittee)

Non-resident/remittee must provide Tax-Residency Certificate (TRC) of their country; often Form 10F (to certify certain facts) is required by CA. Without these, you cannot reliably use DTAA benefit or certificate for lower/nil deduction.

9.5 CA certificate – Form 15CB – detail level

Practising CA must verify remitter is responsible for payment/transfer, nature of income, taxability, correct TDS rate, whether lower/nil certificate exists, verify non-resident’s PE/ residency status, global remittance consequences. The certificate must have DSC and membership number.
As your CA-firm, maintain standard operating checklist for Form 15CB to expedite.

9.6 Penalty risk and exposure

Non-compliance can lead to:

• Bank withholding/ denying remittance;

• Payer being held liable for non-deduction/deposit of TDS;

• Disallowance of expense in payer’s books if TDS not deducted;

• Interest/penalty under TDS regime;

• Reputation/risk for non-resident (payee) if wrongly treated.
  Therefore proactive compliance avoids remediation later.

10. Detailed Process Flow 

Step 1: Pre-remittance engagement

• Ascertain whether payment/transfer is chargeable to tax in India (with your CA opinion) under Section 195/DTAA.

• Check whether transfer falls under Rule 37BB exception list (purpose-code).

• Check aggregate transfers this FY to that remittee or for that nature to determine ₹5 lakh threshold.

• Decide whether Form 15CB is required (if taxable & > ₹5 lakh).

• Obtain remittee’s TRC, Form 10F, any certificate under Section 197 (if applicable).

• Step 2: CA certificate (Form 15CB)

• CA reviews all facts, issues certificate.

• Ensure DSC, membership details.
  Step 3: Remitter completes Form 15CA online

• Determine correct Part (A/B/C/D).

• Fill details: remitter info, remittee info, nature, amount, bank details, etc.

• Attach/upload CA certificate if Part C.

• Submit and obtain acknowledgement.
  Step 4: Bank submission and remittance execution

• Submit to authorised-dealer bank: Form 15CA acknowledgement, Form 15CB (if applicable), contract/invoice, TRC/10F.

• Bank verifies forms, purpose-code, TDS deposit proof (if deduction required).

• Remittance/transfers executed by bank on compliance.
  Step 5: Post-remittance & record-keeping

• Maintain copies of submitted forms (15CA, 15CB), bank submission proof, CA certificate, remittance/transfer details.

• For audit purposes, track transfers/remittances to non-residents.

• For payer entity: ensure TDS deposit and returns (Form 27Q) filed if TDS deduction.
  Step 6: Periodic review and compliance assurance

• Each financial year review aggregate transfers/remittances.

• For existing relationships with foreign service providers or NRO→NRE transfers, review if nature of payment/transfer has changed (e.g., royalties vs reimbursement).

11. Illustrative Examples

Example 1: Payment / transfer below ₹5 lakh, taxable
A resident company pays USD 4,000 (~₹3.3 lakh) to a US-based consultant for technical services (taxable in India). Aggregate transfers to that consultant this FY are ₹3.3 lakh (<₹5 lakh).

• Form 15CA Part A required.

• No Form 15CB required.

• TDS under Section 195 required at applicable rate, deposit, return filing, certificate issuance.

• Bank will check Part A submission and TDS deposit.
  Example 2: Payment / transfer above ₹5 lakh, taxable
  Resident firm pays USD 20,000 (~₹17 lakh) to foreign company for software licensing (taxable). Aggregate transfers exceed ₹5 lakh.

• Form 15CB required (CA certificate).

• Form 15CA Part C required (since taxable & >₹5 lakh).

• TDS deduction required.

• Bank submission: 15CB + Part C of 15CA + TRC/10F.
  Example 3: Payment / transfer not taxable
  Resident individual (NRI) sends ₹10 lakh remittance from NRO account to NRE account (debt repayment) which is not income chargeable to tax in India.

• Form 15CA Part D required (since payment/transfer not chargeable).

• No Form 15CB required.

• No TDS deduction.

• Bank submission: Part D acknowledgement, explanation of nature of transfer.
  Example 4: Specified payment under Rule 37BB (no forms)
  Resident company remits ₹2 crore for “Indian investment abroad in equity capital (share subscription)” purpose-code S0001. Falls under Rule 37BB list where forms not required.

• Verify that payment/transfer falls strictly under such purpose-code and other criteria.

• No Form 15CA/Form 15CB required.

• Bank may still ask for proof that purpose code qualifies.

• Document accordingly.

12. FAQs 

Q1. Is Form 15CA required if payment/transfer is made to a resident rather than non-resident?
No. The forms apply when remittance/transfer is to a non-resident or foreign company. Section 195 applies to non-residents.
Q2. What if there is no tax liability under India but bank asks for forms?
If the payment/transfer is not chargeable to tax and falls under Rule 37BB specified payments, forms may not be required. But remitter must document nature of payment/transfer, submit Part D (if applicable) or justify non-requirement.
Q3. Can Form 15CB certificate be prepared after remittance/transfer?
No. Ideally CA certificate (Form 15CB) must be obtained before remittance/transfer; bank expects it prior to execution. Remitting without Form 15CB (when required) may lead to bank hold-up, audit issues.
Q4. What if aggregate remittance/transfer is below ₹5 lakh but individual payment exceeds ₹5 lakh?
Threshold is aggregate during the financial year. If total transfers to that non-resident/foreign company remains ≤₹5 lakh, then only Part A of Form 15CA. Still, TDS deduction (if taxable) is required.
Q5. What about amendment/withdrawal of Form 15CA?
Remitter may withdraw Form 15CA within 7 days of filing (portal functionality). After that, bank submission remains final.
Q6. Who is the ‘person responsible for remittance/transfer’?
As per Section 195 and Rule 37BB, the person responsible is the payer or remitter of the amount outside India. They must file forms and deduct tax (if applicable).

13. Summary Table – Compliance Checklist