Why Are Form 145 and 146 Required for Payment to an NRI? 🌍

We often receive questions from Indian businesses:

“We have to pay a foreign party. Why is the bank asking for 15CA and 15CB?”

The reason is that when money is being remitted from India to a non-resident, the tax implications of the payment may need to be examined before the money is sent outside India.

The business may need to determine:

📌 What is the payment for?

📌 Is the payment taxable in India?

📌 Is TDS applicable?

📌 Does the DTAA provide any different treatment?

📌 What information needs to be submitted for the remittance?

This is where Form 145 and 146 (Old 15CA and 15CB) become relevant.

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What Is Form 145 (Old 15CA)? 📄

Form 145 is the remitter's information/declaration relating to the foreign remittance.

It generally contains information regarding:

📝 Indian remitter

📝 Non-resident recipient

📝 Amount of remittance

📝 Nature and purpose of payment

📝 Taxability

📝 TDS details, where applicable

The applicable information is furnished as part of the process for making the foreign remittance.

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What Is Form 146 (Old 15CB)? 👨‍💼

Form 146 is the corresponding CA certificate where a CA's certification is required.

The CA reviews the transaction and considers matters such as:

🔎 Nature of payment

🔎 Taxability under Indian Income Tax provisions

🔎 Applicable TDS provisions

🔎 DTAA provisions

🔎 Applicable rate of tax

🔎 Amount of tax, where applicable

Therefore, Form 146 should not be treated as simply an invoice-based certificate.

The underlying transaction needs to be reviewed before determining the tax treatment.

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Does Every Payment to an NRI Require Form 146? ⚠️

No.

This is one of the most important points.

A payment being made outside India does not automatically mean that a CA certificate is required in every case.

The requirement depends on factors such as:

📌 Nature of payment

📌 Taxability in India

📌 Amount of remittance

📌 Applicable provisions

📌 Whether the relevant conditions for CA certification are satisfied

Therefore, the transaction should be reviewed before deciding which form is required.

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What Types of Payments May Require Tax Review? 💰

Indian businesses can make many different types of payments to foreign parties.

For example:

💻 Software or technology payments

👨‍💼 Professional or consultancy fees

📢 Advertising expenses

💰 Interest payments

©️ Royalty payments

📦 Import-related payments

🌐 Other services received from foreign parties

The tax treatment can be different for each type of payment.

The nature of the transaction matters more than simply the amount being remitted.

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Simple Example – Indian Company Paying a US Company 🇺🇸

Suppose an Indian company receives an invoice of ₹10,00,000 from a US company for professional services.

Before making the payment, the tax position should be reviewed.

The basic process is:

Nature of service
↓
Taxability in India
↓
DTAA review
↓
TDS determination
↓
Form 145 / Form 146 requirement
↓
Foreign remittance

This helps the business avoid treating the remittance as merely a banking transaction.

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Where Does DTAA Come Into the Picture? 🌎

If an Indian business is making a payment to a resident of another country, the relevant Double Taxation Avoidance Agreement (DTAA) may also need to be considered.

For example, an Indian company paying a US company may need to examine the India–USA DTAA along with the applicable Indian tax provisions.

Depending upon the nature of income and applicable treaty conditions, the tax treatment may differ.

This is one of the reasons why foreign remittances often require professional tax review.

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Common Mistakes We See ⚠️

❌ Assuming every foreign payment is taxable in India.

❌ Assuming no TDS is required because the recipient is outside India.

❌ Preparing the remittance forms without understanding the actual service.

❌ Ignoring DTAA provisions.

❌ Providing incomplete information to the CA or bank.

❌ Waiting until the last day to arrange the required documents.

❌ Assuming that receiving an invoice from a foreign company automatically determines the TDS treatment.

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What Documents Should You Keep Ready? 📑

Before approaching your CA for the foreign remittance review, keep the relevant documents ready.

📄 Foreign party invoice

📄 Agreement or contract, where applicable

📄 Description of services

📄 Recipient's country

📄 Tax residency information, where relevant

📄 Amount and currency

📄 Payment terms

📄 Supporting correspondence, where relevant

Having complete information allows the tax position to be reviewed properly before the payment is processed.

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Why Should You Take Professional Advice? 💡

The difficult part is not simply filling a form.

The important question is:

“What is the correct tax treatment of this payment?”

For example, the same ₹10 lakh payment could have different implications depending on whether it relates to:

Goods → Services → Royalty → Interest → Professional Fees

The applicable Income Tax provisions and DTAA treatment may therefore need to be considered before deciding the TDS and remittance requirements.

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How HSJ And Associates Helps With Foreign Remittances

At HSJ And Associates, we help businesses review the tax implications of payments being made to NRIs and foreign entities.

Our process generally includes:

🔎 Understanding the transaction

📄 Reviewing the invoice and agreement

📊 Determining the nature of payment

🌍 Reviewing applicable DTAA provisions

💰 Examining TDS implications

📝 Determining the applicable remittance documentation

✅ Preparing the applicable CA certification where required

The objective is to ensure that the foreign remittance is supported by an appropriately reviewed tax position.

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Don't Wait Until the Payment Date ⏰

Foreign remittance documentation should ideally be planned before the payment is due.

Sometimes additional information may be required from the foreign recipient, such as tax residency details or information regarding the nature of services.

Early review helps avoid:

⚠️ Bank delays

⚠️ Last-minute documentation

⚠️ Incorrect TDS decisions

⚠️ Repeated queries

A little planning before the remittance can make the entire process much smoother.

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Key Takeaway 🎯

📌 Form 145 and 146 (Old 15CA and 15CB) relate to applicable foreign remittance reporting and certification.

📌 Form 145 is the remitter-side information/declaration, while Form 146 is the CA certificate where applicable.

📌 Not every payment to an NRI or foreign company automatically requires Form 146.

📌 The nature and taxability of the payment should be reviewed before deciding the TDS treatment.

📌 DTAA provisions may also need to be considered.

📌 Proper documentation and professional review can help avoid delays and incorrect tax treatment.

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