Send money abroad in case of Commercial / Business transactions

CA Gaganmeet Singh

1 year ago

Check out, How to send money abroad in case of commercial/business transactions, the Types of Documents required, and Applicable Charges

Foreign Outward Remittance

Case – II: Commercial / Business transactions

Basic Documents Required:

Requesting letter for O/w Remittance from the customer	Yes
Form A1 (For Import Payments only) Form A2 (for payments other than imports and remittances covering intermediary trade)	Yes
Declaration under FEMA	Yes
Copy of Agreement, Invoice/Purchase Order	Yes
Form 15CA/15CB along UDIN (Not Required in case of Import of Goods. Ref. Rule 37BB)	Yes

Types of Charges:

Margin Matrix, % may vary on the basis amount of remittance.
SWIFT Charges
GST (Service Tax) (Min Rs. 45)
Import Charges
Foreign Outward Remittance charges (Min Rs. 1,000).

Example

CA Cult, a business entity needs to make the payment for technical services received from outside India, let’s say, from USA. Particulars of the transactions are as follows:

Invoice Amount: $5,000
Conversion Rate: Rs. 80/$
Amount in INR $ 5,000 * 80 = Rs. 4,00,000/-
Remittance is Chargeable to Tax in India

Documents required for the above Remittance:

Request Letter for Foreign Remittance
Form A2
Declaration under FEMA
Copy of Agreement with Service Provider, Copy of Invoice
Form 15CA Part A Only (Amount is Chargeable to Tax but not Exceeding Rs. 5 Lakhs)*

*Note: In the above example, if the amount of Remittance exceeds Rs. 5,00,000/- then we need to provide Form 15CA Part C along with Form 15CB and UDIN.

Calculation of Charges

Margin Matrix: $5,000 * 12% = Rs. 600/-
SWIFT Charges = 500 + 18% GST = Rs. 590/-
GST (Service Tax)
Upto Rs. 1 Lakh * 1% = 1,000
From Rs. 1 Lakh to Rs. 4 Lakhs (i.e., on remaining Rs. 3 Lakhs * 0.5%) = 1,500
GST would be = 1,000 + 1,500 = 2,500 * 18% = Rs. 450/-
Foreign Outward Remittance Charges = Rs. 4 Lakhs * 0.12% = Rs. 480 + 18% GST thereon
But the Minimum Charges are Rs. 1,000/-.
Therefore in this case, Rs. 1,000+ 18% GST thereon = Rs. 1,000 + 180 = Rs. 1,180/

Note: Import Charges are applicable in case of Import only.

Applicability of forms 15CA and 15CB are as under (Source- Income-tax Portal):

Form 15CA has four sections:

Remittance Chargeable to TAX

Part A – If remittance or the aggregate of such remittances is chargeable to tax and does not exceed 5 lakh rupees during the financial year
Part B – If remittance is chargeable to tax and the remittance or the aggregate of such remittances, exceeds 5 lakh rupees during the financial year and an order / certificate u/s 195(2) / 195(3) / 197 has been obtained from the AO
Part C – If remittance is chargeable to tax and the remittance or the aggregate of such remittances, exceeds 5 lakh rupees during the financial year and a certificate in Form No. 15CB from an accountant has been obtained.