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Common scenario involving payment of interest on the buyer’s credit to the foreign branch of an Indian bank and whether Form 15CA/CB compliance is necessary.
Query: Ind Co. imported goods from entity in Hongkong. & Ind Co. obtained funding (i.e Trade/ buyer’s credit against imports) from “Singapore Branch of ABC Bank India (‘ABC Singapore’). Ind Co. is making payment of interest on buyer’s credit to ABC Singapore
Case Summary
Whether 15CA/CB compliance is required for the payment made by Ind Co. to ABC Singapore?
Foreign Branch of an Indian Bank
Section 195(6) and Rule 37BB
Practical Reality
Our Recommendation
Sample Language for CA Declaration (Optional)
“This is to certify that the interest payment being made by M/s [Ind Co.] to ABC Bank, Singapore Branch, pertains to a loan facility availed from a foreign branch of ABC Bank India, a resident bank. Since the payment is made to a branch of a resident entity, the remittance is not chargeable to tax in India and is not subject to the provisions of section 195 of the Income Tax Act, 1961.”
Where ABC Singapore is regarded to be a branch of ABC India, payment made to ABC Singapore will be treated at par with payments being made to an Indian Bank (resident in India). A foreign branch of an Indian bank is regarded to be an extension of the Indian bank itself and not a separate foreign entity. When payment is being made to a resident, no compliance u/s 195(6) is required. However, Bank insist for certificate
Form 15CA/CB is not required in this case as the payment is being made to a resident bank’s foreign branch. However, due to conservative banking practice, be ready to furnish a CA declaration or file Part D of Form 15CA if insisted by the bank.
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