Procedures vary for overseas remittances

If you are a resident Indian and you are remitting money under LRS to your own overseas bank account or for making investments or buying property abroad, you only need to file Form A2 with the remitting bank , and must provide a declaration that you have not exceeded your LRS limit of $250,000 for the year. However, if the LRS remittance exceeds 7 lakhs, then the bank will collect an additional 5% of the additional amount by way of Tax Collected at Source (TCS). It can be claimed as a tax credit against your income tax liability when you file your tax return.

If you are an NRI or OCI, you will also need to submit Form A2 and a declaration to the effect that the total remittances by you do not exceed the prescribed limit of $1 million (including current income) under foreign exchange . Law. As an NRI/OCI, no TCS will be applicable on your remittances, as the remittances are not being made under LRS.

Another requirement has been emphasized by banks in the case of NRI/OCI remittances, even if such remittances are being made by them in their own overseas bank accounts. Banks generally insist that for such remittances, a certificate in Form 15CB from a Chartered Accountant, and information in Form 15CA (both filed online) to the Income Tax Department should also be submitted . These forms are not asked by the banks when the remittance is being made by the resident under LRS.

Form 15CA and 15CB are income tax forms, prescribed in cases of deduction of tax at source from payments to non-residents. Any income chargeable to tax is required to be deducted at source from payment to a non-resident, and such forms are required to be furnished irrespective of whether such payment is chargeable to tax . In case the payment is not taxable as income of the recipient and is covered by LRS, the Income Tax rules provide exemption from furnishing such forms. No special exemption has been provided for remittances by NRIs/OCIs. However, if the NRI/OCI is transferring funds from his/her Indian bank account to his/her own overseas bank account, he/she is not making any payment to anyone. Payment shall mean that the remittance is being made to another person. One cannot pay himself for anything. The transaction itself is therefore not covered by the provision of the law, as it requires payment to a non-resident to be enforceable. In fact, if one tries to upload the form, the nature of remittance does not fall under any of the categories permitted under the drop-down menu on the website, and hence one has to rectify and fit it in any of the categories that are available. is in the drop-down menu. This clearly demonstrates that the tax department also does not envisage filing of such forms for remittance by NRIs/OCIs themselves.

Then why do banks insist on submission of such forms filed with the Income Tax Department before allowing such remittances, though it is not required by law? The origin may perhaps lie in a circular issued by the Reserve Bank of India (RBI) almost a few decades ago, when certain forms (Appendix A and B) were to be submitted as per practice for all remittances, though not prescribed by tax laws. it was done . Even after amending the tax laws to formalize such forms by introducing Form 15CA and 15CB, banks continue to follow the same old practice.

Whether such form is required at all in case of remittances by NRIs/OCBs to their overseas bank accounts? All income paid to NRIs/OCIs is subject to TDS at rates ranging from 20% to 30%, which is higher of all income tax liabilities of NRIs/OCIs. Even the bank paying the savings interest 100 deductions 33 to an NRI/OCI from such interest as TDS. Tax is also deducted at source on capital gains of NRIs/OCIs. The purpose of Form 15CA/15CB is to ensure that all taxes due on the consignment are paid in full before making the remittance. When TDS has already been deducted on all income, then where is the question of paying any further tax at the time of remittance?

Perhaps it is time that the RBI instructs banks to insist on such forms where the tax law requires such forms to be furnished, and CBDT clarifies that forms are not required to be furnished where the payer himself Transferring funds. This will ensure that unnecessary procedures do not deter NRIs/OCIs who wish to remit their funds out of India.

Gautam Nayak is a Partner at CNK & Associates LLP.