Payment to outside India

When a domestic company makes a foreign remittance to a non-resident (such as LinkedIn Singapore), the following tax compliance requirements under the Income Tax Act, 1961, apply:

1. TDS (Tax Deducted at Source) Under Section 195

• Requirement: Any person making a payment to a non-resident that is chargeable to tax in India must deduct TDS under Section 195.

• Rate: The TDS rate is determined by the lower of:

  • The rates prescribed under the Income Tax Act, 1961.

  • The rates prescribed under the Double Taxation Avoidance Agreement (DTAA) between India and the payee's country of residence (Singapore, in this case).

• Important Note: To avail of the beneficial DTAA rate, you generally need to obtain a Tax Residency Certificate (TRC) from the recipient. Additionally, ensure the recipient provides their Tax Identification Number (TIN) or an equivalent PAN to avoid higher withholding tax under Section 206AA.

2. Form 15CA and Form 15CB

These forms are required to monitor foreign remittances and ensure tax compliance.

• Form 15CB: This is a certificate issued by a Chartered Accountant (CA). It is mandatory if the payment (or aggregate of payments in a financial year) to a non-resident exceeds ₹5 Lakh and is chargeable to tax. The CA verifies the nature of the payment, the taxability, and the applicable TDS rate.

• Form 15CA: This is a declaration filed by the remitter (your company) via the Income Tax e-filing portal.

  • Part C of Form 15CA must be filed if the remittance exceeds ₹5 Lakh and requires a certificate (Form 15CB).

  • If the payment is below ₹5 Lakh or is not chargeable to tax, different parts of Form 15CA may apply (e.g., Part A or Part D).

Summary of Compliance Steps:

1. Determine Taxability: Assess if the payment is taxable in India under Section 5 and 9 of the Income Tax Act and applicable DTAA provisions.

2. Obtain TAN: Ensure your company has a Tax Deduction Account Number (TAN) to deduct and deposit TDS.

3. Deduct & Deposit: Deduct the appropriate TDS at the time of credit or payment (whichever is earlier) and deposit it using Challan 281 by the 7th of the following month.

4. CA Certification (if >₹5 Lakh): Engage a CA to obtain Form 15CB.

5. File Forms: File the relevant part of Form 15CA on the income tax e-filing portal.

6. Quarterly Return: File Form 27Q (the quarterly TDS return for payments made to non-residents).

7. TDS Certificate: Issue the TDS certificate (Form 16A) to the recipient.

Disclaimer: This information is for educational purposes. Given the complexities of cross-border taxation and potential DTAA benefits, it is highly recommended to consult with a professional Chartered Accountant to review your specific contract with LinkedIn to confirm the exact tax treatment.

Summary

For a foreign remittance to a non-resident exceeding ₹5 lakh:

• TDS: You must deduct tax under Section 195 at the lower of the Income Tax Act rate or the relevant DTAA rate.

• Forms: You must obtain a Form 15CB from a Chartered Accountant and subsequently file Form 15CA (Part C) on the Income Tax portal before making the remittance.

• Compliance: You must also deduct the tax, deposit it, file quarterly Form 27Q returns, and issue Form 16A to the recipient.