Hi All,
One of my Indian resident client is paying fee for representing them in a British court to a foreign law firm in UK. For transferring the sum, Bank insisted to give 15CA or 15CB. Can I get a clarity on which form to be used for transferring the sum and also the legality of deducting tax on such payment?
Thanks in Advance.
Which Form to Use?
Form 15CA: This form is required when your client, as a resident, is making an outward remittance to a foreign entity. The form serves as a declaration confirming that all applicable taxes have been properly deducted as per the Income Tax Act, 1961.
Form 15CB: This form is required to be certified by a Chartered Accountant. It certifies that the remittance made by the Indian resident is in compliance with tax laws, including any TDS that is to be deducted on the payment to the foreign law firm.
In this case, Form 15CA is required to be submitted to the bank along with Form 15CB.
Tax Deduction (TDS) Legality:
TDS Applicability: According to Section 195 of the Income Tax Act, if you are making a payment to a foreign law firm for legal services, TDS must be deducted at the applicable rate under the Income Tax Act or as per the DTAA (Double Taxation Avoidance Agreement) between India and the UK.
The applicable rate of TDS will depend on whether the payment qualifies as fees for technical services or business income under the DTAA. If the foreign law firm is not providing services that fall under technical services or business income, it may fall under Section 195 at the general rate of tax.
You will need to verify whether TDS is applicable and at what rate, considering the DTAA provisions.
To-
Form 15CA and Form 15CB are needed for transferring funds to the foreign law firm.
TDS must be deducted, and the rate will depend on the nature of the payment and the applicable DTAA provisions.
For easy bulk XML generation of Form 15CA and Form 15CB, our Excel-based utility can help simplify the process.
Download here: https://xltool.in/15ca-15cb/ | www.xltool.in
CAclubindia
