Income Tax Department launches nationwide verification of suspicious foreign remittances
The Income Tax Department, under directions from the Central Board of Direct Taxes (CBDT), has launched a nationwide verification exercise into suspicious foreign remittances
The exercise follows the identification of entities that allegedly remitted large sums of foreign exchange abroad despite reporting little or no business turnover
The verification has so far covered around 394 entities — including 117 located in districts along India's land borders — along with 36 professionals who certified the underlying remittances
The action originated from a search operation targeting fictitious charitable trusts that were allegedly providing "accommodation entries" against bogus donations, which uncovered a wider network of shell entities remitting funds overseas
The CBDT has flagged that Chartered Accountants issuing Form 15CB certificates are expected to exercise due diligence before certifying such remittances, and non-compliant issuance of certificates will invite scrutiny
Liberalised Remittance Scheme (LRS) and FEMA, 1999
The Liberalised Remittance Scheme, introduced by the RBI in February 2004 under the Foreign Exchange Management Act (FEMA), 1999, permits resident individuals to remit up to USD 250,000 per financial year abroad for permitted current and capital account transactions — such as education, medical treatment, maintenance of relatives, or overseas investment — without seeking prior RBI approval. Remittances by non-individual entities (companies, trusts) for business purposes fall outside the LRS individual cap but are separately regulated under FEMA's current and capital account rules, and it is this business-remittance channel that the current verification exercise concerns.
Key Details
- LRS annual cap: USD 250,000 per resident individual per financial year, cumulative across all transactions and remittance categories
- Legal basis: FEMA, 1999, which replaced the more restrictive Foreign Exchange Regulation Act (FERA), 1973, marking India's shift from exchange "regulation" to exchange "management"
- Remittances above the permitted purpose or amount, or by entities using shell structures to disguise fund movement, can attract action not just under FEMA (civil, RBI-enforced) but also under direct tax and anti-money-laundering law
- Entities with little or no reported turnover remitting large sums is a classic red flag for "accommodation entries" — bogus transactions used to convert unaccounted funds into an apparently legitimate paper trail before moving them abroad
The Income Tax Department's verification targets exactly this pattern — remittances disproportionate to a filer's declared turnover — which suggests possible circumvention of FEMA's remittance framework using shell entities and bogus charitable trusts as conduits.
Form 15CA/15CB Certification (Section 195, Income-tax Act, 1961)
Section 195 of the Income-tax Act, 1961, read with Rule 37BB of the Income-tax Rules, requires tax to be deducted at source on payments to non-residents that are chargeable to tax in India, and mandates that remitters file Form 15CA (a self-declaration on the tax portal) before remitting funds abroad. Where the remittance is chargeable to tax and the aggregate remittance to a non-resident in a financial year exceeds ₹5 lakh, an additional Form 15CB — a certificate from a practising Chartered Accountant confirming the correct tax treatment (including applicability of any Double Taxation Avoidance Agreement) — is mandatory before the bank can process the transfer.
Key Details
- Form 15CA: remitter's electronic self-declaration filed on the income-tax e-filing portal
- Form 15CB: mandatory CA certificate when remittance is taxable and aggregate remittances to the same non-resident exceed ₹5 lakh in a financial year
- Where the aggregate remittance to a non-resident is ₹5 lakh or less, only Form 15CA (Part A) is required, without a CA certificate
- Authorised Dealer banks (under FEMA) will not process a foreign remittance without the requisite Form 15CA/15CB compliance, making the CA-certifier a critical gatekeeper in the system
The CBDT's emphasis on the "due care and diligence" expected of professionals issuing Form 15CB signals that the certification gatekeeping mechanism itself may have been circumvented or exploited by the entities under verification, prompting scrutiny of the certifying professionals alongside the remitting entities.
Central Board of Direct Taxes (CBDT)
The CBDT is the apex statutory authority for administration of direct tax laws in India, constituted under Section 3 of the Central Boards of Revenue Act, 1963. It formulates policy, oversees the Income Tax Department's functioning, and issues directions — such as this nationwide verification exercise — under its administrative and supervisory powers over field tax authorities.
Key Details
- Statutory basis: Central Boards of Revenue Act, 1963, which bifurcated the erstwhile Central Board of Revenue (1924) into the CBDT and the Central Board of Indirect Taxes and Customs (CBIC), effective 1 January 1964
- CBDT functions under the Department of Revenue, Ministry of Finance
- Composition: a Chairman (ex-officio Special Secretary to the Government of India) and up to six Members (ex-officio Additional Secretaries)
- CBDT-directed verification exercises are distinct from formal "search and seizure" (Section 132) or "survey" (Section 133A) actions — this is a lower-intensity compliance-verification step that can escalate to those if discrepancies are confirmed
The verification exercise is being run under CBDT's overall policy direction across the Income Tax Department's field formations nationwide, reflecting a coordinated administrative response rather than an isolated regional investigation.
- Entities covered in the verification exercise so far: approximately 394, including 117 in districts along India's land borders
- Professionals (Form 15CB certifiers) under scrutiny: 36
- LRS annual remittance cap for resident individuals: USD 250,000 per financial year (RBI, under FEMA 1999)
- Form 15CB mandatory threshold: aggregate remittances to a non-resident exceeding ₹5 lakh in a financial year
- Statutory basis for Form 15CA/15CB: Section 195, Income-tax Act, 1961, read with Rule 37BB of the Income-tax Rules, 1962
- CBDT constituted under: Section 3, Central Boards of Revenue Act, 1963 (effective 1 January 1964)