TDS on sale of property

  1. TDS on Sale of Property under Section 194-IA – Meaning and Scope

The term “TDS on sale of property” means tax that must be deducted at source by the buyer when purchasing an immovable property (other than rural agricultural land) from a resident seller, when the consideration or stamp duty value meets a threshold. This is governed by Section 194-IA of the Income Tax Act.

Under Section 194-IA, the buyer must deduct tax at the time of payment or credit of the sale consideration.
The objective is to ensure transparency of property transactions and compliance of the seller’s income tax liability.

TDS on sale of property

 

  1. Applicability of TDS on Sale of Property and Exemptions

2.1 When it applies

“TDS on sale of property” under Section 194-IA applies when:

  • An immovable property (other than rural agricultural land) is transferred.
  • The total sale consideration (or stamp duty value, whichever is higher) is Rs. 50 lakh or more.
  • The seller is a resident in India.
  • The buyer makes payment or credit to the seller.

2.2 When it does not apply

  • If the property is rural agricultural land. .
  • If the sale consideration (and stamp duty value) is less than Rs. 50 lakh.
  • If the seller is a non-resident (then other provisions apply, see section below).
  • If the buyer fails to deduct but still the threshold not met, the section doesn’t trigger.

2.3 Important caveats

  • The threshold is inclusive of full consideration; if above Rs 50 lakh, TDS is required on the entire amount.
  • Joint transactions: In some cases, each buyer’s share may be considered.
  1. TDS on Sale of Property – Rate, Calculation and Examples

3.1 Rate

Under Section 194-IA, the rate of TDS is 1% of the sale consideration (or stamp duty value, whichever is higher) where applicable.
No surcharge or health & education cess is added to this 1 %.

3.2 Basis of calculation

  • The base is the full sale consideration agreed between buyer and seller.
  • If the stamp duty value (as assessed by the registration authority) is higher than consideration, TDS is calculated on the higher of the two.
  • Example: If property sold for Rs. 75 lakh, TDS = 1% of Rs. 75 lakh = Rs. 75,000.
  • If payments are made in instalments, deduction must happen at the time of each instalment (or credit) when the threshold is met.

3.3 What is included/excluded

  • Included: Consideration paid for immovable property, including any amounts incidental to the transfer (if they form part of the consideration).
  • Excluded: GST component (for under-construction, etc) is not to be included in TDS base under Section 194-IA.
  1. Form 26QB TDS – Step-by-Step Filing Process

4.1 Form 26QB TDS (Challan cum Statement)

  • The buyer must deposit the TDS and file Form 26QB. The form collects: buyer PAN, seller PAN, property details, assessment year/financial year, payment/challan info.
  • It must be submitted within 30 days from the end of the month in which TDS was deducted.
  • The government portal (NSDL / TIN) is used for this filing.

4.2 Form 16B (TDS certificate)

  • After Form 26QB is filed, and TDS deposited, buyer must issue Form 16B to the seller.
  • The seller can download it from the portal after registration on TRACES using PAN and acknowledgement details.

4.3 Reflection in Form 26AS

  • The TDS deducted must reflect in seller’s Form 26AS (Tax Credit Statement). If not, seller may lose credit.

4.4 Other filings

  • The buyer is not required to obtain TAN (Tax Deduction Account Number) for this purpose; PAN suffices.
  1. Buyer Deduct TDS Property Obligations and Deadlines

5.1 Time for deduction

  • The deduction of TDS must happen at the earlier of: (i) payment to seller; or (ii) credit to seller’s account.

5.2 Time for deposit

  • Buyer must deposit TDS amount within 30 days from the end of the month in which deduction was made.

5.3 Filing of Form 26QB

  • Same time-limit as deposit applies.

5.4 Form 16B issuance

  • Buyer issues to seller after successful deposit and acknowledgement.

5.5 Consequences of delay

  • If buyer fails to deduct or deposit timely, interest and penalties apply.
  1. Correction of Form 26QB for Property Transactions

6.1 Why correction needed

If incorrect details are submitted in Form 26QB (e.g., wrong PAN of buyer/seller, incorrect value, wrong assessment year), the TDS credit may not reflect in seller’s Form 26AS. The buyer must correct to ensure credit is properly given.

6.2 Correction facility

  • The portal has “Request for correction” option under the Statement/Form tab in TRACES. Buyer (registered) can submit correction request.
  • Fields that may be corrected: PAN of buyer, PAN of seller, financial year/assessment year, sale consideration, property details, amount paid/credited, date of deduction/payment.
  • After submission, a “Correction ID” is generated and status can be tracked via “Track correction request.”
  • Buyer may need to provide CIN (Challan Identification Number) of original payment and then resubmit with new details.
  • If buyer is not registered with DSC (Digital Signature Certificate), bank e-verification may be used (except in NRI cases).

6.3 Common mistakes

  • Wrong PAN entries of buyer/seller.
  • Not deducting TDS when threshold is met.
  • Deducting but delaying deposit.
  • Not reflecting correction before registration of property, causing seller’s credit loss.
  • Including GST or registration/stamp-duty in base incorrectly.
  1. Specific scenarios & special cases

7.1 Instalment payments

If the buyer pays in instalments, TDS must be deducted for each payment/credit when made. Even if final sum crosses threshold, earlier payments where threshold not yet met may still trigger deduction once cumulative passes threshold.

7.2 Joint buyers / joint sellers

When multiple buyers/sellers exist, each buyer’s deduction obligations must be considered. If one buyer’s share exceeds Rs. 50 lakh, TDS applies.
Similarly for multiple sellers, each seller must ensure their share is correctly reflected.

7.3 NRI / Non-resident seller

If the seller is a non-resident (NRI/OCI/foreign resident), Section 194-IA may not apply; instead Section 195 or other provisions apply.
In such cases:

  • Higher TDS rates may apply.
  • Buyer may need TAN.
  • Different forms (e.g., Form 27Q) may be required.

7.4 Agricultural land / rural land

Sale of purely rural agricultural land is generally exempt from TDS under Section 194-IA. However, urban agricultural land or non-rural may trigger.

7.5 Under-construction property or addition of GST

For under-construction property, ensure TDS base excludes GST. Buyer should deduct 1% on purely sale consideration.

  1. Consequences of non-compliance (TDS on sale of property)
  • Buyer becomes “assessee-in-default” under Section 201 of the Income Tax Act if TDS not deducted or deposited.
  • Interest: If deducted but not deposited: 1.5 % per month (or part thereof) until date of deposit. If not deducted: 1% per month until deduction.
  • Penalty: Buyer may be liable to pay TDS amount again, plus penalty.
  • Seller may lose credit for TDS deduction (i.e., it won’t reflect in Form 26AS) leading to higher tax liability or refund delays.
  • Registration authority will still register the property even if TDS not deducted, but tax department can proceed against buyer.
  1. Practical checklist for buyers and sellers

For Buyer:

  • Verify seller’s PAN and status (resident vs non-resident).
  • Check if property value (or stamp duty value) ≥ Rs. 50 lakh.
  • Deduct 1% of consideration (or higher of stamp duty value) at time of payment/credit.
  • File Form 26QB online within 30 days from end of month of deduction.
  • Deposit TDS amount and retain CIN/acknowledgement.
  • Register on TRACES and download Form 16B for seller.
  • Ensure seller’s Form 26AS shows the TDS credit.
  • If any error in Form 26QB, submit correction request.
  • Maintain records of deduction and deposit for audit/verification.

For Seller:

  • Provide correct PAN to buyer.
  • After buyer’s deduction and deposit, ensure TDS reflected in Form 26AS.
  • Download Form 16B issued by buyer.
  • Claim TDS credit while filing Income Tax Return.
  • Confirm that buyer has complied; if not, ask buyer for proof or rectify.

For Both:

  • Document the transaction clearly (agreement, payment schedule, PANs, TDS deduction and deposit).
  • If under-construction, segregate GST from sale consideration.
  • If non-resident seller, coordinate appropriate section (Section 195) compliance.
  • Understand correction procedure for errors in Form 26QB early to avoid delays.
  1. FAQs (focused on “TDS on sale of property”)

Q1. Who is responsible for TDS on sale of property under Section 194-IA?
Answer: The buyer of the immovable property is responsible for deducting the 1% TDS and depositing it.

Q2. Is TDS required if property value is below Rs. 50 lakh?
No, Section 194-IA does not apply if sale consideration (and stamp duty value) is below Rs. 50 lakh.

Q3. What happens if seller’s PAN is not provided?
If seller’s PAN is not available, higher TDS rate may apply (20%) and credit may not reflect properly.

Q4. Does TDS affect capital gains tax of seller?
TDS is separate from actual capital gains calculation; the seller computes capital gains while IT return. The TDS serves as advance tax credit.

Q5. How and when to correct Form 26QB if there is an error?
Buyer registered on TRACES can use “Request for correction” option, fill corrected details (PAN, amount, AY etc.), obtain correction ID and track status.

Q6. Does Section 194-IA apply for purchases from NRIs?
No, if seller is non-resident, Section 194-IA may not apply; instead Section 195 or other provisions apply with typically higher TDS rates.

Q7. If payment is in instalments, how is TDS treated?
TDS must be deducted at each instalment/payment time when the obligation arises; cumulative threshold may be relevant.

  1. Summary

“TDS on sale of property” via Section 194-IA mandates a 1% deduction by the buyer when purchasing immovable property (excluding rural agricultural land) from a resident seller if the value is Rs. 50 lakh or more. Buyer files Form 26QB, issues Form 16B, ensures deposit within time-limits. Errors in filing or deposit may cause credit loss for seller and liability for buyer. Special scenarios (NRIs, joint owners, instalments) need care.

Owner of this information can be reached at K M GATECHA & CO LLP.

 

Important note: This does not lead to legal advice or legal opinion and is personal view and for information purpose only. It is prepared on  the basis of facts available and applicable law.It is suggested to go through applicable provisions of law,latest regulations,judicial announcements, circulars, notifications and clarifications  etc before taking any action based on above content.You agree here by that for any action taken on basis of above information in any manner writer or K M GATECHA & CO LLP is not responsible or liable for  any omission,reliability,accuracy,completeness,errors or authenticity.This work by professional is just for knowledge purpose and does not constitute any kind of  solicitation of work or advertisement.

 

1. Introduction & Legal Basis

Under Section 195 of the Income Tax Act, 1961 (hereafter “the Act”), any person responsible for making a payment (other than salary) to a non-resident (including non-resident individuals, foreign companies) must deduct tax at source (“TDS non-resident payment”) if such sum is chargeable to tax in India.

The purpose: ensure that income accruing/arising (or deemed so) to a non-resident in India does not escape taxation at source.
On the compliance side, remittances to non-residents (even where income may not be taxable) impose obligations via Form 15CA and Form 15CB, under Rule 37BB of the Income-tax Rules, 1962.
As a chartered-accountant firm in Ahmedabad, you need to advise clients (resident entities, individuals, and NRIs remitting from an NRO to NRE account) that:

  • Determine applicability of Section 195 for the payment or transfer;

  • Ensure correct filing of Form 15CA/Form 15CB before remittance (if required);

  • Ensure authorised-dealer banks demand those forms and cross-check;

  • Ensure proper documentation and bank submission so remittance is processed without hold-up.

  

Process for 15CA and 15CB

 

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 (for your CA firm to assist clients)

  • 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 (ClearTax article June 17 2025)

  • Clarifications emphasise that payments/transfers even if not taxable must be reported (via Form 15CA) unless specifically exempted under Rule 37BB.
    Implication: As your clients make foreign remittances/transfers (including NRO to NRE), ensure you are using the latest rule-set (2025) rather than legacy interpretations.

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.
Advise clients early in the remittance/transfer process (NRO → NRE) to gather forms, CA certificate, liaise with bank.

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 Internal control & audit implications

For your accounting/audit clients making foreign remittances/transfers, advise them to build internal control: regular tracking of remittances/transfers to non-residents, early interface with CA for Form 15CB, early submission of Form 15CA, maintain proof of bank submission, retention of acknowledgement emails.
For auditing engagements, ensure sample remittances/transfers are reviewed for compliance under Section 195, forms 15CA/15CB, bank documentation, TDS deposits.

9.7 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 for Client Engagement (Your Firm)

Step 1: Pre-remittance engagement

  • Identify whether client is remitting/transferring funds from an NRO to an NRE account or making payment to a non-resident foreign company.

  • Obtain contract/invoice/services agreement identifying nature of payment/transfer.

  • 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).

  • Provide client checklist of documents needed.
    Step 2: CA certificate (Form 15CB)

  • CA reviews all facts, issues certificate.

  • Ensure DSC, membership details.

  • Provide client copy.
    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.

  • Review new rules/updates (Rule 37BB changes, TDS rate changes) and advise clients.

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

  • Review bank’s checklist and client’s readiness for future transfers.

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 (From Practitioner Perspective)

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

Item Requirement
Identify remitter & remittee details Name, legal status, PAN (remitter), address, principal place of business
Nature of remittance/transfer Country, currency, amount in INR, date of proposed payment/transfer
Determine taxability Under Act/DTAA, does income accrue/arise in India?
TDS deduction If taxable, deduct at correct rate (or lower/nil certificate) at credit/payment
Forms required? If payment/transfer to non-resident: Form 15CA always (unless exception); Form 15CB if taxable & >₹5 lakh
Form 15CA part to fill Part A (≤₹5 lakh taxable), Part B (certificate under 195(2)/(3)/197), Part C (>₹5 lakh taxable), Part D (not chargeable)
Form 15CB certificate CA to certify details, tax rate, deduction, DTAA compliance; DSC required
Document TRC/Form 10F Remittee’s country tax-residency proof, Form 10F statement of facts
Purpose-code & exemption list Check if remittance/transfer falls under Rule 37BB specified payments (no form requirement)
Bank submission Submit acknowledgement of Form 15CA, Form 15CB (if applicable), remittance/transfer contract, TRC/10F to AD bank
Record-keeping Maintain copies of forms, CA certificate, bank submission, TDS deposit/returns (if any)
Aggregate tracking Monitor transfers/remittances to non-residents during FY to determine thresholds (>₹5 lakh)
TDS deposit & return If deduction made: deposit by 7th of next month; file Form 27Q quarterly; issue Form 16A to payee
Monitor updates Stay informed of Rule 37BB changes, TDS rate changes, e-Filing portal changes

 

Important note: This does not lead to legal advice or legal opinion and is personal view and for information purpose only. It is prepared on  the basis of facts available and applicable law.It is suggested to go through applicable provisions of law,latest regulations,judicial announcements, circulars, notifications and clarifications  etc before taking any action based on above content.You agree here by that for any action taken on basis of above information in any manner writer or K M GATECHA & CO LLP is not responsible or liable for  any omission,reliability,accuracy,completeness,errors or authenticity.This work by professional is just for knowledge purpose and does not constitute any kind of  solicitation of work or advertisement.

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