26 September 2013
we will paying huge sum of amount to non resident as consultancy fee apart from tds deduction does we need to inform RBI also under FEMA , if yes than which form we need to fill ???
31 July 2024
When paying a significant sum to a non-resident for consultancy fees, both the Income Tax Act and the Foreign Exchange Management Act (FEMA) regulations must be complied with. Here’s a detailed breakdown:
### **1. Income Tax Act Compliance**
- **TDS Deduction:** As per Section 195 of the Income Tax Act, any payment to a non-resident, including consultancy fees, is subject to Tax Deducted at Source (TDS). The applicable TDS rate depends on the nature of the payment and the provisions of the Double Taxation Avoidance Agreement (DTAA) between India and the non-resident’s country of residence.
### **2. FEMA Compliance**
Under FEMA, payments to non-residents are subject to reporting requirements to ensure compliance with foreign exchange regulations. Here’s what you need to do:
#### **A. Reporting Requirements**
- **FIRC (Foreign Inward Remittance Certificate):** For remittances received from non-residents, the bank will provide an FIRC. This is usually for payments received from abroad, not for payments made.
- **Form 15CA and 15CB:** When making payments to non-residents, especially for large amounts, the following forms are required:
- **Form 15CA:** This is a declaration by the remitter about the payment being made to the non-resident and the tax deducted on it. It has to be filled and submitted online through the Income Tax Department’s e-filing portal.
- **Form 15CB:** This is a certificate issued by a Chartered Accountant confirming that the tax has been deducted and that the payment complies with the provisions of the Income Tax Act. This form needs to be signed by a CA and submitted along with Form 15CA.
#### **B. Submission Process**
1. **Fill Form 15CA:** The remitter (your company) needs to fill Form 15CA on the Income Tax Department’s e-filing portal. The form requires details of the remittance, tax deduction, and compliance with FEMA regulations.
2. **Obtain Form 15CB:** Have your Chartered Accountant complete and sign Form 15CB. This form certifies that the tax deduction is in accordance with Indian tax laws.
3. **Submit Forms:** Upload Form 15CA and the signed Form 15CB on the Income Tax e-filing portal. After successful submission, you will receive a confirmation which must be kept for records.
#### **C. Other Considerations**
- **RBI Reporting:** Direct reporting to the Reserve Bank of India (RBI) is not typically required for consultancy payments under the FEMA Act, as compliance is primarily ensured through the submission of Forms 15CA and 15CB. However, the bank facilitating the remittance may need to ensure that the payment complies with FEMA guidelines.
### **Summary**
- **TDS Compliance:** Ensure TDS is deducted as per the applicable rates. - **FEMA Compliance:** Submit Form 15CA and Form 15CB to report the remittance. - **Bank’s Role:** Your bank will process the remittance and may need to see the completed Forms 15CA and 15CB.
**Recommendation:**
Consult a tax professional or a chartered accountant to ensure that all compliance requirements are met accurately and to avoid any penalties or issues with regulatory authorities.
If you need further clarification or have additional questions, feel free to ask!
CAclubindia
