The Indian Income tax department (“ITD”) has started verification of details submitted in Forms 15CA and 15CB with the actual transactions. According to the ITD, the following facts shall be examined in case where any variation is identified:
a. Whether there is any variation between the data furnished and the actual payment and the reasons thereof;
b. Reason for characterization of each transaction; and
c. Rates of taxation
Background
Section 195 of the Income Tax Act, 1961 requires that every assessee making a payment to a non-resident is required to deduct applicable tax while making such payments to the non-resident. The section also requires that information in the prescribed format should be submitted with the ITD for such payments.
Accordingly, it was prescribed in Rule 37BB, that certificate in Form 15CB should be obtained from the Chartered Accountant on the taxability such transactions and the particulars of the payment should be submitted on the ITD portal in Form 15CA. Both Form 15CA and 15CB are then required to be submitted to the bank while making the payment.
The ITD has now started calling for verification of the forms submitted with actual transactions.
Documentation
In light of the above, it is imperative that the following supporting documents shall be maintained in case of every 15CA and 15CB filled.
|
Nature of Document |
Significance |
|
Invoice/agreements with the party |
Mandatory |
|
Tax Residency Certificate (TRC) |
Where applicable |
|
Form 10F |
Where applicable |
|
No Permanent Establishment (PE) certificate |
Where applicable |
|
Permanent Account Number (PAN) |
Where applicable |
|
Form 15CB from Chartered accountant |
Mandatory |
|
Form 15CA as submitted on ITD Portal |
Mandatory |
|
Payment Request letter as issued to the bank |
Mandatory |
|
Payment advice from the bank |
Where available |
It is advisable to maintain all the necessary documents along with the copy of the form filed in a sequential and indexed manner to ensure regular compliance and avoid unnecessary complications at the time of inquiry.