The Central Board of Direct Taxes (CBDT) has released Draft Form No. 146, proposing a comprehensive accountant's certificate for payments made to non-residents or foreign companies under the Income-tax Act. The draft form is aimed at strengthening tax compliance, ensuring correct tax deduction at source (TDS), and aligning remittance reporting with Double Taxation Avoidance Agreements (DTAA).
Once notified, Form 146 will play a critical role in documenting cross-border remittances and determining taxability under Indian tax law.
What is Draft Form No. 146?
Form No. 146 is a certificate to be issued by a Chartered Accountant certifying the taxability, applicable TDS rate, and DTAA position for payments made by an Indian resident to:
- A non-resident (not being a company), or
- A foreign company
The form captures detailed information about the remitter, remittee, nature of remittance, taxability under the Income-tax Act, and DTAA relief, if any.
Click here to download the Format of Draft Form No 146
Key Sections Covered in Draft Form 146
1. Particulars of the Remitter
The form requires exhaustive details of the person making the remittance, including:
- Name and complete address
- PAN and TAN (if available)
- Residential status and legal status
- Contact details and email ID
2. Particulars of the Remittee
Details of the foreign recipient must be reported, such as:
- Name and PAN (if available)
- Tax Identification Number (TIN) in country of residence
- Country of residence and complete overseas address
- Principal place of business and contact details
3. Details of the Remittance
This section captures transactional details, including:
- Country and currency of remittance
- Amount in foreign currency and INR
- Bank and authorised dealer details
- Proposed date of remittance
- Nature and purpose code of remittance as per RBI
4. Nature of Remittance - Extensive Coverage
Draft Form 146 includes a detailed list of 65 nature-of-payment categories, covering:
- Professional and technical services
- Royalty and software payments
- Dividend, interest, and investment income
- Long-term and short-term capital gains
- Business income and other residual payments
This classification will help tax authorities assess correct tax treatment.
5. Taxability Under the Income-tax Act
The accountant must certify:
- Whether the remittance is chargeable to tax in India
- Relevant charging section
- Amount of income taxable
- Applicable TDS rate
- Basis of determining tax liability
6. DTAA Relief and Treaty Analysis
Where DTAA benefits are claimed, the form requires:
- Confirmation of Tax Residency Certificate (TRC)
- Relevant DTAA and treaty article
- Nature of income under DTAA
- Taxable income and treaty-based TDS rate
Separate disclosures are mandated for:
- Royalty, FTS, interest, dividend
- Business income linked to permanent establishment
- Capital gains
- Other income categories
7. Details of Tax Deducted at Source
The form captures:
- Amount of tax deducted
- Whether tax is deducted under the Act or DTAA
- Applicable rate
- Net amount remitted after TDS
- Date of tax deduction
8. Accountant's Verification
The certificate must be digitally verified by a Chartered Accountant, mentioning:
- Examination of agreements and books of accounts
- UDIN, membership number, and firm registration details
- Confirmation of the correctness of information
Why Draft Form 146 is Important
Draft Form 146 significantly enhances:
- Transparency in foreign remittances
- Accuracy in TDS compliance
- Consistency in DTAA application
- Audit trail for cross-border payments
Once finalised, it is expected to reduce disputes related to incorrect TDS rates and treaty misuse.
What Taxpayers and Professionals Should Do
- Review existing foreign remittance processes
- Align documentation with Form 146 requirements
- Ensure availability of TRC and DTAA documents
- Prepare for enhanced CA certification responsibilities
Stakeholders may also provide feedback before the form is notified.
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