Form 146: Cross-Border Tax Certificate Replacing Form 15CB

Background: Why Form 15CB Was Retired

For over a decade, Form 15CB was the cornerstone of cross-border tax compliance in India. Introduced under Section 195 of the Income Tax Act, 1961, it required a Chartered Accountant to certify the nature and taxability of any foreign remittance before the money left Indian shores. The accompanying Form 15CA was the taxpayer's self-declaration filed on the TRACES portal.

The Income Tax Act, 2025 — a comprehensive recodification of India's direct tax law — replaced these with Form 146 (CA certificate) and Form 147 (taxpayer declaration). The renumbering aligns with the Act's new section numbering scheme, but the underlying compliance intent is identical and, in several respects, tightened.

What Is Form 146?

Form 146 is a Chartered Accountant's certificate issued under Section 174 of the Income Tax Act, 2025 (the successor provision to Section 195 of the 1961 Act). It certifies that a proposed foreign remittance has been examined, the applicable tax has been correctly determined, and the remitter has either deducted TDS at the correct rate or has valid grounds to remit without deduction.

The CA signs the certificate on the basis of information furnished by the remitter and their own independent examination of the transaction, applicable Double Taxation Avoidance Agreement (DTAA), and domestic TDS provisions.

Form 146 vs Form 15CB: Key Differences

Parameter	Form 15CB (Old)	Form 146 (New)
Governing Act	Income Tax Act, 1961 — Section 195	Income Tax Act, 2025 — Section 174
CA Certificate	Form 15CB	Form 146
Taxpayer Declaration	Form 15CA (Parts A/B/C/D)	Form 147
Threshold for CA cert	Remittances exceeding ₹5 lakh/year (aggregated)	Remittances exceeding ₹5 lakh/year (aggregated, same threshold)
DTAA analysis	Required but loosely defined	Explicitly required; CA must certify DTAA applicability, beneficial ownership, and Permanent Establishment risk
Filing sequence	Form 15CB first, then Form 15CA	Form 146 first, then Form 147 — same sequence
Portal	TRACES (income tax e-filing portal)	Updated e-filing portal under the new Act (same infrastructure)
Penalty for non-compliance	Section 271-I of 1961 Act — ₹1 lakh per failure	Corresponding penalty section under 2025 Act — same quantum

When Is Form 146 Mandatory?

Form 146 is required when all three of the following conditions are met:

• The remittance is being made to a non-resident or foreign company.
• The payment is chargeable to tax in India (or may be chargeable — even a doubtful situation requires the certificate).
• The aggregate amount remitted in the financial year exceeds ₹5 lakh.

The ₹5 lakh threshold is per remitter, per non-resident payee, per financial year — and it applies on a cumulative basis. Once crossed, all subsequent remittances to that payee require Form 146, including amounts below ₹5 lakh individually.

Exempted Remittances (Form 146 Not Required)

Certain payments are exempt from the Form 146 / Form 147 requirement. These broadly mirror the Part A exemptions under the old Form 15CA regime and include:

• Remittances below ₹5 lakh in the financial year (for payments not taxable in India).
• Payments of import of goods (not chargeable to tax under the Act).
• Remittances covered by a Nil/Lower Deduction Certificate issued by the Assessing Officer under the corresponding section of the 2025 Act.
• Specified payments listed in a notified schedule (similar to the old Rule 37BB list — approximately 33 categories such as shipping freight, airline tickets, bank charges, etc.).

Step-by-Step Process for Form 146 Compliance

Step 1 — Determine Taxability

Before approaching a CA, the remitter must determine whether the payment is taxable in India. This involves checking:

• The nature of income (royalty, FTS, business profit, dividend, interest, etc.).
• Whether a DTAA between India and the payee's country applies.
• Whether the payee has a Permanent Establishment (PE) in India that would bring the income within India's taxing jurisdiction.
• Whether the payee has furnished a Tax Residency Certificate (TRC) and Form 10F to claim treaty benefits.

Step 2 — Engage a Chartered Accountant

The remitter engages a CA who holds a valid Certificate of Practice. The CA will require:

• Agreement or contract between remitter and payee describing the nature of services/payment.
• Invoice from the foreign payee.
• Tax Residency Certificate (TRC) of the payee (for DTAA claims).
• Form 10F (payee's self-declaration of residency details).
• PAN of the foreign payee (if allotted).
• Bank details and remittance instructions.
• Prior year remittances to the same payee (to check cumulative threshold).

Step 3 — CA Issues Form 146

After reviewing all documents, the CA certifies Form 146 on the e-filing portal. The certificate captures:

• Details of the remitter and non-resident payee.
• Nature and amount of remittance.
• Applicable TDS rate (under domestic law or DTAA, whichever is beneficial).
• Amount of TDS deducted or reason for nil deduction.
• CA's UDIN (Unique Document Identification Number) — mandatory for authenticity.

Step 4 — Remitter Files Form 147

After the CA uploads Form 146, the remitter logs into the e-filing portal and files Form 147 (the taxpayer declaration, equivalent of old Form 15CA). Form 147 auto-populates key fields from the linked Form 146 to reduce data entry errors.

Step 5 — Furnish to Bank and Remit

The remitter submits the signed Form 146 acknowledgement and Form 147 acknowledgement to the authorised dealer bank. The bank will not process the remittance without these documents (for amounts requiring Form 146). The bank also files Form 15CC (foreign remittance reporting) — this form number continues under the new Act.

TDS Rates Applicable Under Form 146

The TDS rates for cross-border payments under the 2025 Act mirror the rates under the 1961 Act, as the substantive tax rates are largely unchanged in the recodification. Key rates:

Nature of Payment	Domestic TDS Rate	Typical DTAA Rate (varies by treaty)
Royalty / FTS to non-residents	20% + surcharge + cess	10–15% (most DTAAs)
Interest to non-residents	20% + surcharge + cess	10–15% (most DTAAs)
Dividend to non-residents	20% + surcharge + cess	10–15% (most DTAAs)
Capital gains (short-term, listed)	15% + surcharge + cess	Varies
Any other income	30% + surcharge + cess	Varies

Where a valid DTAA applies and the payee furnishes TRC + Form 10F, the lower of the domestic rate and the treaty rate applies. The CA must certify which rate has been applied and why.

Penalties for Non-Compliance

Failure to comply with Form 146 requirements can be costly:

• Penalty for non-filing: The corresponding provision of the Income Tax Act, 2025 (successor to Section 271-I) imposes a penalty of ₹1 lakh for each failure to furnish the certificate.
• TDS liability on remitter: If TDS was required and not deducted, the remitter becomes an assessee in default and is liable for the TDS amount plus interest at 1.5% per month from the date of payment to the date of deduction.
• Disallowance of expense: Under Section 40(a)(i) (renumbered equivalent in 2025 Act), if TDS is not deducted on a payment to a non-resident, the entire expenditure may be disallowed in computing the remitter's taxable income.
• Bank-level blocking: Authorised dealer banks are prohibited from processing foreign remittances without the required Form 146/147 documentation. Banks themselves face RBI action for non-compliance.

Practical Tips for Smooth Form 146 Compliance

• Start early: The CA needs time to review agreements, check treaty eligibility, and verify UDIN. Don't approach the CA on the day of the remittance deadline.
• Maintain a remittance register: Track all foreign payments made to each non-resident through the year. The ₹5 lakh threshold aggregates across multiple remittances to the same party.
• Get TRC and Form 10F upfront: If the payee is in a DTAA country, insist on these documents before the first payment. Banks and CAs will ask for them later, so collecting early saves time.
• Check for PE risk: If the foreign service provider regularly visits India, has employees in India, or has a dependent agent in India, there may be a PE — which changes the taxability analysis significantly.
• Use TRACES portal carefully: The UDIN must be validated on the ICAI portal by the CA before Form 146 is submitted. Without a valid UDIN, the portal will reject the submission.
• Retain documents for 8 years: Agreements, invoices, TRC, Form 10F, Form 146, and Form 147 must be retained as they are subject to tax scrutiny.

Impact on Common Business Scenarios

Software Subscriptions and SaaS Payments

Payments to foreign SaaS providers (e.g., AWS, Salesforce, Adobe) may qualify as royalty under Indian domestic law and some DTAAs. If aggregate payments exceed ₹5 lakh, Form 146 is mandatory. Many Indian companies historically ignored this for small-ticket subscriptions — the 2025 Act provides no relaxation on this.

Consulting and Professional Fees

Fees for technical or management consulting services paid to foreign firms qualify as Fees for Technical Services (FTS) in most cases. These are taxable in India at 20% under domestic law, but often reduced to 10–15% under DTAA. Form 146 is required for amounts above ₹5 lakh.

Import Payments

Pure import of goods (products, not services) is not chargeable to tax under Indian income tax law and is therefore exempt from Form 146. However, mixed contracts (goods + installation + training) must be carefully bifurcated — the service component may require Form 146.

Group Company Payments (Related Party)

Inter-company payments to foreign group entities are particularly scrutinised. Transfer pricing adjustments, arm's length certification, and Form 146 requirements all apply simultaneously. CAs must be careful about the interaction between transfer pricing documentation and the TDS certification.

Frequently Asked Questions

Q: Is Form 146 required for remittances to countries with no DTAA?

Yes. The Form 146 requirement is based on the domestic Income Tax Act, not on treaty existence. In the absence of a DTAA, the full domestic TDS rate applies, and the CA certifies accordingly.

Q: Can Form 146 be obtained after the remittance?

No. Form 146 must be obtained before the remittance. The bank will not process the transfer without it (for applicable remittances). Post-remittance certification is not valid compliance and attracts penalties.

Q: Who is responsible — the remitter or the CA?

The remitter is primarily liable for TDS deduction, filing, and payment. The CA is responsible for the accuracy of the certificate and faces professional liability under ICAI rules for incorrect certification. However, tax department action (demand, penalty) is initiated against the remitter.

Q: What if the payee disputes the TDS deduction?

The payee can claim a refund of excess TDS by filing a return in India (if they have PAN) or through the Mutual Agreement Procedure (MAP) under the applicable DTAA. The remitter's obligation is to deduct at the correct rate as certified in Form 146 — they are not responsible for subsequent treaty disputes.

Q: Is the ₹5 lakh threshold per transaction or aggregate?

It is aggregate per financial year per non-resident payee. If you pay a foreign consultant ₹2 lakh in April and ₹3.5 lakh in August, Form 146 is required for the August payment (as the cumulative total crosses ₹5 lakh), and for all subsequent payments to the same consultant that year.

Conclusion

Form 146 under the Income Tax Act, 2025 is not a mere renaming exercise — it comes with a tightened scope of CA certification, particularly around DTAA analysis, beneficial ownership, and PE risk. Indian businesses making cross-border payments should treat this as an opportunity to review their foreign remittance processes, engage qualified CAs early, and build robust documentation habits.

The underlying policy objective — ensuring tax is correctly withheld on taxable cross-border income before money leaves India — remains unchanged. What has changed is the legislative framework and the expectation of rigour in compliance. Getting Form 146 right protects the remitter from TDS demands, disallowances, and penalties that can far exceed the compliance cost.

For any questions about TDS on foreign remittances or to calculate the applicable rate on your specific payment, use TaxFetch's TDS & TCS Calculator which covers all domestic and non-resident TDS sections under the Income Tax Act, 2025.