With the Income Tax Department intensifying its scrutiny of foreign remittances through data analytics and verification drives, taxpayers and professionals must pay closer attention to the compliance requirements surrounding overseas payments. Recent investigations have revealed instances where entities with limited business activity remitted substantial sums abroad, prompting authorities to examine the underlying documentation, tax positions, and certifications supporting such transactions.

In this environment, Form 15CA and Form 15CB have become critical compliance tools rather than routine procedural filings. Incorrect reporting, inadequate documentation, or improper certification can potentially trigger tax notices and scrutiny proceedings.

When an NRI returns to India temporarily or permanently, one of the most overlooked areas is the change in taxability and foreign asset compliance.
Here’s a clear guide every returning NRI should follow

Determine Your Residential Status (MOST Crucial Step)

Residential status depends only on physical presence, not on visa/OCI/passport. You can fall into one of these categories:

• Resident & Ordinarily Resident (ROR): Full resident. Global income is taxable.
• Resident but Not Ordinarily Resident (RNOR): You qualify as RNOR if you were an NRI in 9 out of 10 preceding years OR you stayed in India ≤ 729 days in the last 7 years.
• RNOR = tax benefits + limited taxation
• Non-Resident (NR)—Only Indian income is taxable.

Why Residential Status Matters

Because taxability COMPLETELY CHANGES:

ROR

➡ Global income taxable in India.
➡ Foreign assets must be declared.
➡ Stringent compliance applies.

RNOR & NR

➡ Only Indian income taxable.
➡ Foreign income not taxed unless received in India.
➡ Foreign assets not reportable in Schedule FA.

After Becoming ROR, These Become Taxable in India

If you turn ROR, the following are fully taxable:

• Salary earned abroad
• Rent from foreign property
• Dividend/interest/FD income abroad
• Capital gains on foreign stocks/ETFs/crypto
• Income retained in foreign bank accounts

India taxes these under normal slabs; DTAA relief may apply.

Mandatory Foreign Asset Disclosure (Schedule FA)

Once you become ROR, Schedule FA becomes compulsory.  You must declare:

• Foreign bank accounts
• Insurance policies with cash value
• Foreign mutual funds, ESOPs, RSUs
• Property outside India
• Interest in foreign LLP/company
• Beneficial ownership in foreign trusts/entities
• Crypto on foreign exchanges

Non-disclosure consequences (Black Money Act, 2015):

• INR 10,00,000 penalty per asset
• Prosecution (up to 7 years)
• Applies even if income is small or NIL
• Exemption: No penalty if total foreign asset value ≤ ₹20 lakh (except immovable property).

Update NRI bank accounts post-return.

• NRE Account: Tax-free interest only till you are NRI/RNOR. And after becoming ROR, interest becomes taxable, and the account must be converted to a Resident Rupee Account.
• FCNR Deposits: Can continue till maturity, even after becoming a resident. & After maturity → convert to RFC/resident account.
• FEMA Update Required: Banks must be notified of your change in residential status.

Capital Gains Planning (Important for Returning NRIs)

As soon as you become ROR, global capital gains become taxable. During the RNOR period (limited window): You may restructure/sell foreign assets tax-efficiently, & gains on foreign assets are not taxable in India during RNOR (except income received in India). Consider DTAA country benefits (US, UAE, UK, etc.)

Summary for Returning NRIs

 

Why Form 15CA and Form 15CB Matter

Whenever a person resident in India makes a payment to a non-resident, the Income Tax Act requires certain disclosures to ensure proper tax compliance. These forms enable the tax department to monitor foreign remittances and verify whether tax has been appropriately deducted at source wherever required.

The information reported in these forms is increasingly being matched with:

• Income tax returns
• GST records
• Banking transactions
• Financial statements
• Foreign remittance purposes
• Supporting agreements and invoices

Consequently, taxpayers should ensure complete consistency across all records before initiating foreign payments.

Legal Framework

The era of treating Form 15CA and Form 15CB as routine documentation is over. With the Income Tax Department increasingly leveraging data analytics and cross-verification of banking, tax, and financial records, every foreign remittance must be backed by robust documentation and a well-supported tax position.

For taxpayers, maintaining contracts, invoices, tax computations, and remittance records is essential. For professionals, Form 15CB certifications should be issued only after conducting thorough due diligence and independently evaluating the taxability of the transaction. The compliance requirements for foreign remittances are primarily governed by:

Section 195(6) of the Income-tax Act, 1961

This provision requires a person making payments to a non-resident to furnish prescribed information regarding such remittances.

Rule 37BB of the Income-tax Rules, 1962

Rule 37BB prescribes the forms, procedures, exemptions, and reporting requirements applicable to foreign remittances.

What is Form 15CA?

Form 15CA is an online declaration filed by the remitter before making a payment to a non-resident or foreign entity. It serves as a mechanism for reporting foreign remittances to the Income Tax Department and must generally be furnished to the authorised dealer bank before processing the transaction.

Objectives of Form 15CA

• Facilitates monitoring of foreign remittances.
• Ensures compliance with withholding tax provisions.
• Creates an audit trail for overseas payments.
• Enables verification of the nature and purpose of remittances.

What is Form 15CB?

Form 15CB is a certificate issued by a chartered accountant certifying the taxability of the remittance and compliance with the applicable provisions of the Income Tax Act and relevant Double Taxation Avoidance Agreements (DTAAs).

The Chartered Accountant is expected to conduct reasonable due diligence before issuing the certificate and not merely rely on declarations made by the remitter.

Information Typically Verified in Form 15CB

• Details of remitter and beneficiary.
• Nature and purpose of remittance.
• Relevant agreements and invoices.
• Taxability under Indian tax laws.
• Availability of DTAA benefits.
• Applicable withholding tax rate.
• Amount of tax to be deducted and deposited.

Due Diligence Before Issuing Form 15CB

Given the ongoing verification exercises by tax authorities, professionals should carefully examine the following:

• Underlying contracts and agreements
• Commercial invoices and supporting documents
• Nature and source of payment
• Taxability under domestic law
• Applicable DTAA provisions
• Books of account and financial statements
• Income-tax return disclosures
• Consistency with banking records and foreign exchange documents

Issuing certifications without adequate verification can expose both the taxpayer and the certifying professional to regulatory scrutiny.

When is Form 15CB not required?

Form 15CB is generally not required in the following situations:

• The remittance is not chargeable to tax in India.
• Aggregate remittance during the financial year does not exceed INR 5 lakh.
• The taxpayer has obtained a lower or nil withholding tax certificate from the assessing officer.

However, taxpayers should evaluate the specific facts of each transaction before concluding that Form 15CB is not required.

Transactions Exempt from Form 15CA and Form 15CB

Rule 37BB provides relief from filing requirements for certain specified transactions. Common exemptions include:

• Certain personal remittances made by individuals.
• Transactions covered under the specified list notified by the Government.
• Certain transactions not requiring RBI approval.

Taxpayers should review the latest exempt category list before proceeding with any foreign remittance.

Filing Process

The filing process involves:

1. Logging into the Income Tax e-Filing Portal.
2. Selecting the applicable Form 15CA category.
3. Obtaining Form 15CB from a Chartered Accountant wherever required.
4. Submitting the form electronically using DSC or EVC.
5. Sharing the acknowledgement with the authorised dealer bank for remittance processing.

Consequences of Non-Compliance

Failure to comply with Form 15CA and Form 15CB requirements can result in:

• Penalty under Section 271-I: A penalty of INR 100,000 may be levied for failure to furnish Form 15CA or Form 15CB, furnishing inaccurate information, and non-compliance with prescribed reporting requirements.
• Operational Challenges: Non-compliance may also lead to delay in foreign remittances, bank rejection of transactions, and income tax notices seeking explanations and supporting documents.

We also support tax calculation assistance, tax payments, submitting of tax filings, and financial planning in this and many other matters through India Financial Consultancy Corporation Pvt Ltd. (IFCCL) (www.caindelhiindia.com).