Funds Transfer to Dubai for New Company Setup

Hi KJ,

Thanks for reaching out. Here’s a quick guide on what you should do given that you’ve already paid ₹8.5 lakhs to a Dubai person for setting up a company there, but you have not done Form 15CA/CB filing or deducted TDS.

1. About Form 15CA and 15CB

• Form 15CA is a declaration of remittance filed online with the Indian tax department.

• Form 15CB is a certificate from a Chartered Accountant certifying the nature of payment and tax compliance.

• These are mandatory when remitting funds abroad if the payment is taxable or exceeds prescribed limits.

2. TDS Deduction

• Usually, payments made to a foreign entity are subject to TDS under Section 195 of the Income Tax Act.

• You should deduct TDS at the applicable rate (depending on the nature of payment and DTAA provisions).

• Failure to deduct or deposit TDS can lead to penalties and interest.

3. Your Situation

• Since the payment is for company setup in Dubai, it is generally considered a business expense.

• Check if this payment attracts tax in India — sometimes, setting up an offshore company is not a taxable service, but usually, it is considered a fee for technical or professional services.

• Hence, TDS under Section 195 is usually applicable at 10% or as per DTAA.

4. Recommended Next Steps

(a) Get Form 15CB from a CA immediately

• A CA will verify the nature of payment and advise on taxability.

• CA issues Form 15CB certifying tax compliance or exemption.

(b) File Form 15CA

• After 15CB is done, file Form 15CA online.

• This regularizes the transaction with the Indian tax authorities.

(c) TDS Payment

• If TDS was not deducted earlier, you should:

  • Deposit the applicable TDS along with interest and penalty if any.

  • File TDS returns for the period.

• Consult your CA on whether you can do a late deduction and payment of TDS with applicable interest.

5. Possible Consequences of Non-Compliance

• Penalty under Section 271-I for failure to deduct tax.

• Interest under Section 201(1A) on delayed deduction and payment.

• The remitter (you) may be held liable for the tax.

6. Summary