Hi,

This single question covers two questions in itself

1. Applicability of TDS on consultancy services on NRI (Bhutan Citizen)
2. Requirement of form 15ca/15cb on payment made to a resident of Bhutan.

Section 195 of the Income Tax Act, 1961 covers the TDS  provision on the payments made by an individual by way of interest or any other amount other than salary to an NRI or a foreign company and also requires the payer to furnish an undertaking in the form 15CA along with a certificate of Chartered Accountants in form 15CB.

Now let’s discuss the first issue involved in the question:

The TDS liability in India is to be decided on two levels:

• First with reference to the provision of this section of the Income Tax Act and
• Second with reference to the provision of the Tax treaty/Double Taxation Avoidance Agreement (DTAA) between India and the country of residence of the NR receiver.

Now if you refer the clause 2 of article 12 of the DTTA between the Indian Government and the Roya Government of Bhutan, it is clearly stated that

Royalties or fees for technical or professional services may also be taxed in the Contracting State i.e India, and according to the laws of that State, but if the beneficial owner of the royalties or fees for technical or professional services is a resident of the other Contracting State i.e Bhutan than the tax so charged shall not exceed 10 percent of the gross amount of the royalties or fees for technical or professional services.

Now let’s discuss the second issue involved in the question i.e requirement of form 15CA and 15CB:

Form 15CA and 15CB  are not required to be furnished for remittance in two cases:

1. if it is covered in the negative list of RBI as per rule 37BB.
2. if the remittance is made by an individual and it does not require prior approval of RBI [as per the provisions of section 5 of the Foreign Exchange Management Act, 1999 (42 of 1999) read with Schedule III to the Foreign Exchange (Current Account Transaction) Rules, 2000]

In your case, it is not covered in the negative list, hence forms 15CA and CB is required to be furnished, there is no such exemption for the country of an NRI.

Thanks.