Form 145, section 58

Dear Sir,

Hope you are doing well.

Please find below the responses:

1. Based on the facts provided, Form 145 should not be required.

The principal reason is that the transaction does not involve a remittance outside India. An NRO account is an Indian bank account maintained in India. Crediting salary to such an account is a domestic banking transaction, notwithstanding the non-resident status of the account holder.

The official guidance issued for Form 145 repeatedly describes the form as the replacement for old Form 15CA in the context of "sending money outside India" and "remittances". The compliance framework appears intended to capture foreign remittances rather than every payment made to a non-resident.

Accordingly, where:

• the salary is paid in India,
• the amount is credited to an Indian NRO account, and
• no outward remittance occurs,

the stronger legal view is that Form 145 is not attracted.

2.Under Section 58, tax is usually calculated on a simple basis:

• either 50% of total receipts, or
• the actual profit if the taxpayer himself declares a higher amount.
  

You can normally pay tax on 50% without maintaining books. Higher profit is considered only if you yourself declare it.

Dear Querist,

1. 
   Form 145 is not required where salary is only credited in India to the employee’s NRO account and there is no remittance outside India. The employer should comply with normal salary TDS/Form 24Q/Form 16.
   
2. In Section 58, “profit actually earned” means higher profit voluntarily declared by the taxpayer, if he wants to declare more than 50%. If you declare 50% or more, books/audit are generally not required under presumptive taxation.

AO cannot simply assume 75% profit without evidence. Keep basic proof of gross receipts, bank entries and invoices, if available.

For a more detailed review of your case, you may book a phone consultation.

CA Shubham Goyal