The Income-tax Department has proposed Draft Form No. 145, prescribing an expanded compliance framework for remittances made to non-residents (not being companies) and foreign companies. The draft form significantly enhances disclosure requirements relating to tax deduction at source (TDS), Double Taxation Avoidance Agreement (DTAA) relief, and certification under Section 395 of the Income Tax Act.
The move aims to streamline cross-border remittance reporting and strengthen oversight of foreign payments.
Applicability of Draft Form No. 145
The form applies where remittances are taxable under the Income-tax Act and categorizes compliance into four parts based on transaction value and certification requirements:
Part A - Remittances up to Rs 5,00,000
Applicable where:
- Remittance (or aggregate during the tax year) does not exceed ₹5 lakh.
- Payment is taxable under the Act.
Key details required include:
- Remitter and remittee information (PAN, TIN, residential status)
- Nature and purpose of remittance
- RBI purpose code
- TDS details (rate, amount, date of deduction)
- Bank and authorized dealer particulars
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Part B - Remittances Above Rs 5,00,000 with Section 395 Certificate
If the aggregate remittance exceeds ₹5 lakh and a certificate under Section 395(1) or 395(2) is obtained from the Assessing Officer, additional disclosures include:
- Certificate number and date
- Section under which the certificate is issued
- Amount on which tax is deductible
- Rate of TDS as approved
This ensures prior tax determination before remittance execution.
Part C - Remittances Above Rs 5,00,000 with Accountant Certificate (Form 146)
Where certification is obtained from an accountant (as defined under Section 515(3)(b)), extensive reporting is required, including:
- Accountant's details (PAN, Membership No., FRN, UDIN)
- Taxability under the Income-tax Act
- DTAA applicability and relevant Article
- Tax Residency Certificate details
- Grossing up under Section 393(10), if applicable
- Capital gains bifurcation (long-term/short-term)
- Royalty, FTS, business income classification
The form also requires a clear distinction between tax deduction under the Act and under the relevant DTAA.
Part D - Remittances Not Taxable in India
Where remittance is not chargeable to tax:
- The remitter must certify non-taxability.
- Declaration includes undertaking to pay tax with interest if later found deductible.
- Nature of remittance must still be selected from prescribed categories.
Expanded Nature of Remittance Categories
Draft Form 145 provides a comprehensive list of 65 remittance types, including:
- Royalty
- Fees for Technical Services
- Interest payments
- Dividend
- Capital gains
- Software payments
- Professional services
- Commission, brokerage, freight
- Winning from lotteries and horse races
This detailed classification improves tracking of income characterisation for withholding tax purposes.
DTAA Reporting and Relief Claims
The draft form requires:
- Confirmation of DTAA claim
- Relevant Article number
- Tax Residency Certificate details
- Taxable income computation under DTAA
- TDS rate as per treaty
This aligns remittance reporting with international tax transparency standards.
Compliance Impact for Businesses and CAs
Draft Form No. 145 introduces a structured and layered compliance regime for foreign remittances. It integrates:
- PAN and TIN disclosures
- RBI purpose codes
- Bank and authorized dealer reporting
- TDS determination methodology
- Certification-backed tax computations
Chartered Accountants, tax professionals, multinational companies, and entities making cross-border payments must carefully review the draft provisions to ensure procedural compliance once notified.
The proposed form reflects the government’s continued focus on tightening withholding tax administration and monitoring cross-border income flows.
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