New Form 15CA & 15CB relating to remittance of payments to a non-resident or to a foreign company & CA Certificate

Currently, remittances to non-residents are allowed by banks if the person making the remittance furnishes an undertaking, accompanied by a certificate from a Chartered Accountant (“CA”) certifying the rate for withholding tax as per section 195 of the Act. The banks then forward the certificates to the Reserve Bank of India (“RBI”), which in-turn forwards it to the Income tax department.

Finance Act, 2008 inserted a new sub section (6) to section 195 effective from April 1, 2008, which requires the person responsible for making payment to a non-resident to furnish information relating to such payments in forms to be prescribed. The Central Board of Direct Taxes (“CBDT”) has now, by notification No 30/2009 dated March 25, 2009, prescribed a new rule 37BB in the Income Tax Rules, 1962 (“the rules”) prescribing Form 15CA and Form 15CB to be filed in relation to remittances to non-residents under section 195(6) of the Income Tax Act, 1961 (“the Act”). This new rule is effective from July 1, 2009 and shall apply to all remittances being made after July 1, 2009. The process that will have to be followed, before any remittance can be made, is as under—



Step 1 : Obtain a certificate from a Chartered Accountant in Form No 15CB


Step 2:Furnish the information in Form No15CA



Step 3:Electronically upload Form 15CA on the designated website


Step 4:Take Print out of Form 15CA and file a signed copy


Step 5:Remit money to the Non Resident


Please note that all the above steps have to be undertaken before remittance of money to the non-resident.

Notification no. 30/2009 is as below:-

In exercise of the powers conferred by section 295 read with sub-section (6) of section 195 of the Income-tax Act, 1961, the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely:-

1. (1) These rules may be called the Income-tax (Seventh Amendment) Rules, 2009.

(2) They shall come into force with effect from 1st July, 2009.

2. In the Income-tax Rules, 1962, after rule 37BA, the following rule shall be inserted, namely:-


“Furnishing of information under sub-section (6) of section 195.

37BB. (1) The information under sub-section (6) of section 195 shall be furnished by the person responsible for making the payment to a non-resident, not being a company, or to a foreign company, after obtaining a certificate from an accountant as defined in the Explanation to section 288 of the Income-tax Act, 1961.

(2) The information to be furnished under sub-section (6) of section 195 shall be in Form No. 15CA and shall be verified in the manner indicated therein and the certificate from an accountant referred to in sub-rule (1) shall be obtained in Form No. 15CB.

(3) The information in Form No. 15CA shall be furnished electronically to the website designated by the Income-tax Department and thereafter signed printout of the said form shall be submitted prior to remitting the payment.

(4) The Director-General of Income-tax (Systems) shall specify the procedures, formats and standards for ensuring secure capture, transmission of data and shall also be responsible for the day-to-day administration in relation to furnishing the information in the manner specified.

Clarification on deduction of tax at source (TDS) on service tax component on rental income under section 194-I of the Income-tax Act

CIRCULAR NO. 4/2008, DATED 28-4-2008



Representations/letters have been received in the Board seeking clarification as to whether TDS provisions under section 194-I of the Income-tax Act will be applicable on the gross rental amount payable (inclusive of service tax) or net rental amount payable (exclusive of service tax).

2. The matter has been examined by the Board. As per the provisions of 194-I, tax is deductible at source on income by way rent paid to any resident. Further rent has been defined in 194-I as

rent means any payment, by whatever name called, under any lease, sub-lease, tenancy or any other agreement or arrangement for the use of (either separately or together) any,-

(a) land; or

(b) building (including factory building); or

(c) land appurtenant to a building (including factory building); or

(d) machinery; or

(e) plant; or

(f) equipment; or

(g) furniture; or

(h) fittings,

whether or not any or all of the above are owned by the payee;

3. Service tax paid by the tenant doesn't partake the nature of income of the landlord. The landlord only acts as a collecting agency for Government for collection of service tax. Therefore it has been decided that tax deduction at source (TDS) under sections 194-I of Income-tax Act would be required to be made on the amount of rent paid/payable without including the service tax.

4. These instructions may be brought to the notice of all officers working in your region for strict compliance.

5. These instructions should also be brought to the notice of the officers responsible for conducting internal audit and adherence to these should be checked by the auditing parties.



[F.No.275/73/2007-IT(B)]

SERVICES TO ASSOCIATED ENTERPRISES TAXABLE

Earlier the services provided to "customers" and "clients" are taxable but now in budget a new provision has been inserted in which it is stated that services provided to associate enterprises are also taxable and to give effect to this provision a amendment has been done that service tax is payable on receipt of credit in the book of accounts .this amendment will be applicable from 10.05.2008.
The following points main points are comes from these amendments

Section 67 has been amended. As per this amendment, service tax is required to be paid by the person liable to pay service tax on the taxable services provided even if the consideration for the taxable services provided is not actually received.
In such cases, service tax is required to be paid immediately after crediting/debiting of the amount in the books of accounts or receipt of payment, whichever is earlier.
This provision is restricted to transaction between associated enterprises
This amendment Comes into force w.e.f. 10th May, 2008.
Removal of doubts stating that any payment received towards the value of taxable service shall include any amount credited or debited, as case may be, to any account, whether called 'Suspense account' or by any other name, in the books of account of a person liable to pay service tax [Refer Explanation to Rule 6(1) of the Service Tax Rules, 1994].

optional service tax scheme to person providing foreign exchange sale & purchase has also been notified ,now they can pay 0.25 % service tax on total gross currency exchanged by them.This option has been started as you may aware of that money changer generally don't show there charges to client billing and only give buy rate and sell rate and earn through arbitrage between buy rate and sell rate.


text of the notification is given hereunder


[TO BE PUBLISHED IN THE GAZETTE OF INDIA, EXTRAORDINARY, PART II, SECTION 3, SUB-SECTION (i)]


Government of India

Ministry of Finance
(Department of Revenue)
New Delhi, the 10th May, 2008

Notification No.19/2008-Service Tax


G.S.R. (E).- In exercise of the powers conferred by sub-sections (1) and (2) of section 94 of the Finance Act, 1994 (32 of 1994), the Central Government hereby makes the following rules to further amend the Service Tax Rules, 1994, namely :-


1. (1) These rules may be called the Service Tax (Second Amendment) Rules, 2008.

(2) Save as otherwise provided in these rules, they shall come into force on the date of their publication in the Official Gazette.


2. In the Service Tax Rules, 1994,-


(i) in rule 4A, for the words “to a customer” wherever they occur, the words “to any person” shall be substituted with effect from the 16th day of May, 2008;


(ii) in rule 4B, for the words “to the customer”, the words “to the recipient of service” shall be substituted with effect from the 16th day of May, 2008;


(iii) in rule 6,-


(a) in sub-rule (1), after the third proviso, the following Explanation shall be inserted, namely:-


“Explanation.- For the removal of doubts, it is hereby declared that where the transaction of taxable service is with any associated enterprise, any payment received towards the value of taxable service, in such case shall include any amount credited or debited, as the case may be, to any account, whether called ‘Suspense account’ or by any other name, in the books of account of a person liable to pay service tax.”;


(b) after sub-rule (7A), the following sub-rule shall be inserted with effect from the 16th day of May, 2008, namely:-


“(7B). The person liable to pay service tax in relation to purchase or sale of foreign currency, including money changing, provided by a foreign exchange broker, including an authorised dealer in foreign exchange or an authorized money changer, referred to in sub-clauses (zm) and (zzk) of clause (105) of section 65 of the Act, shall have the option to pay an amount calculated at the rate of 0.25 per cent. of the gross amount of currency exchanged towards discharge of his service tax liability instead of paying service tax at the rate specified in section 66 of Chapter V of the Act:


Provided that such option shall not be available in cases where the consideration for the service provided or to be provided is shown separately in the invoice, bill or, as the case may be, challan issued by the service provider.


Illustration


Buying rate $US 1 = Rs.38, selling rate $US 1 = Rs.40


(i) Person exchanged $100 for equivalent rupees

Transaction value = Rs.3800 (Rs.38 x 100)

Service tax payable = Rs.9.5 (0.25% x 3800)


(ii) Person exchanged equivalent rupees for $100

Transaction value = Rs.4000 (40 x 100)

Service tax payable = Rs.10 (0.25% x 4000).”.


[F. No. B1/5/2008-TRU]

(G.G. Pai)

Under Secretary to the Government of India


Note.- The principal rules were notified vide notification No.2/94-Service Tax, dated the 28th June, 1994 and published in the Gazette of India, Extraordinary vide number G.S.R.546 (E), dated the 28th June, 1994 and were last amended vide notification No.4/2008-Service Tax, dated the 1st March, 2008 and published vide number G.S.R. 148(E), dated the 1st March, 2008.

MANDATORY PAN % INCREASED IN ETDS ETCS RETURN.

The CBDT through a press notification Issued on 12.02.2008 has increased the mandatory Pan % (Earlier issued on 25/09/2007)in e-tds and e-tcs return o and from quarter ending 31.03.08 and no return will be accepted if mandatory pan has not been filled on or after 01.04.2008.

New % will as under.

For form 24q (etds return for salary mandatory pan limit will be 95% increased from 90%
For Form 26q and form 27eq(e-TCS) mandatory pan limit will be 85% increased from 70% earlier.

This new % will be applicable from 01.04.2008 on each & every return filed on or after 01.04.2008 though related to a period earlier than quarter ending 31.03.2008

This is surprise to me and you because on 04/02/2008 in a earlier press release CBDT has increased the due date of filing etds/etcs return to 29.02.2008 for quarter ending 30.09.2007 and has mentioned the reason as hereunder

"This is in view of the difficulties being faced by the tax deductors /collectors in filing statements with the correct PAN data mandatorily required to be furnished to the extent of at least 90% in the cases of salaried deductees and 70% in the cases of other deductees."

so my point is that a week ago CBDT is of a view of that it is difficult for a deductor to collect mandatory pan % of 70/90% so date of etds/etcs return has been increased but now after a week,

Is circumstances are improved so much that lead them(CBDT) to increase the mandatory percentage from 90 to 95 percent in case of salary and 70 to 85 % in any other case?
Do They (CBDT) think that it is easy to collect 95/85 % pan easier than 90/70% ?
If they relaxing the time period a week ago due to non collection of mandatory pan % by deductor than why they are increasing the mandatory pan %?
The last date to file etds /etcs return for quarter ending 30.09.2007 has been increased to 29.02.2008 but due date for quarter ending 31.12.2007 remains 15.01.2008 .why?.

all the answer they know better.

Though I am firm believer in etax management should be applied as early as possible and its more beneficial to tax payers than deptt yet policy should not be changed frequently.

one thing good they done in all this episode is that they have declared the policy at reasonable time before the applicable date.so we should make ourselves ready for the event and should take following steps so that no problem arises at the time of filing of etds/etcs return.

For salary return.

To all your present employees (who has been deducted or to be deducted has not submitted their pan ) issue instruction to submit their pan /Photocopy of pan card in 10-15 days.
Check present employees Pan Structure as FUV will check only structure of pan .
Help employees to get Pan card issued if they don't have earlier
For new employees release first month salary only if the they give pan card photocopy
verify/find pan online from deptt site with input data name,fathers name and date of birth which generally with the employer.
print occasionally a note on payslip that submission and correctness of pan is mandatory and obligation of the employee and by not doing so they will not only have difficulties in getting tax credit of tax but will face penal proceedings under the income tax act.
For other than salary return
Insert a clause in NIT (notice inviting tender) that contractor who has a valid pan on their name can only apply and they will give proof of pan as and when required.
Issue letters to earlier /present contractor to submit their pan.
Try to find the pan of contractor on internet as some time date of incorporation is given on bill of the company of firm.
Encourage/help the Small Contractors to get pan issued from income tax deptt.

all the above are indicative list and I write as it come to my mind .

For Deductees

one more thing I would like to share with you ,if you are a deductee than please provide your pan to deductor as this will not only help your deductor to file their etds return but also in the era of annexure less income tax return due credit of your tds will be available to you through your online pan ledger (form 26as).

Scientific research expenditure - Approved scientific research associations/institutions

Section 35(1)(ii) of the Income-tax Act, 1961 - Scientific research expenditure - Approved scientific research associations/institutions
NOTIFICATION NO. 8/2009, DATED 7-1-2009

It is hereby notified for general information that the organization Aeronautical Development Agency, DRDO Bhawan, New Delhi has been approved by the Central Government for the purpose of clause (ii) of sub-section (1) of section 35 of the Income-tax Act, 1961 (said Act), read with rules 5C and 5D of the Income-tax Rules, 1962 (said Rules) with effect from 1-4-2006 in the category of "scientific research association' subject to the following conditions, namely:—
(i) The sole objective of the approved 'scientific research association' shall be to undertake scientific research;
(ii) The approved organization shall carry out the scientific research activity by itself;
(iii) The approved organization shall maintain books of account and get such books audited by an accountant as defined in the explanation to sub-section (2) of section 288 of the said Act and furnish the report of such audit duly signed and verified by such accountant to the Commissioner of Income-tax or the Director of Income-tax having jurisdiction over the case, by the due date of furnishing the return of income under sub-section (1) of section 139 of the said Act;
(iv) The approved organization shall maintain a separate statement of donations received and amounts applied for scientific research and a copy of such statement duly certified by the auditor shall accompany the report of audit referred to above.
2. The Central Government shall withdraw the approval if the approved organization.—
(a) fails to maintain books of account referred to in sub-paragraph (iii) of paragraph 1; or
(b) fails to furnish its audit report referred to in sub-paragraph (iii) of paragraph 1; or
(c) fails to furnish its statement of donations received and amounts applied for scientific research referred to in sub-paragraph (iv) of paragraph 1; or
(d) ceases to carry on its research activities or its research activities are not found to be genuine; or
(e) ceases to conform to and comply with the provisions of cLause (ii) of sub-section (1) of section 35 of the said Act read with rules 5C and 5D of the said Rules.

[F. No. 203/105/2008/ITA-II]

Exemption of - Interest payable by public sector company on specified bonds/debentures

Section 10(15) (IV) of the Income-tax Act, 1961 - Exemption of - Interest payable by public sector company on specified bonds/debentures
NOTIFICATION NO. 9/2009 [S.O. 99(E)], DATED 7-1-2009


In exercise of the powers conferred by item (h) of sub-clause (iv) of clause (15) of section 10 of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby specifies the issue of tax free bonds by India Infrastructure Finance Company Limited, carrying an interest rate of upto maximum 8 percent annum, aggregating to an amount of ten thousand crore rupees only, to be issued by India Infrastructure Finance Company Limited, New Delhi during the financial year 2008-09, for the purpose of the said section :
Provided that the benefit under the said section shall be admissible only if the holder of such bonds registers his or her name and the holding with the said Corporation.

[F. NO. 178/95/2008 IT (A-1]