When Is Form 145 Not Required in 2026? Rule 220 Exemptions, LRS & IFSC

Direct answer

Form 145 is not required for every payment to a non-resident. Under Rule 220 of the Income-tax Rules, 2026, the filing obligation depends on the nature of the remittance and on specific exclusions. In particular, the Income Tax Department’s current Form 145 guidance identifies exclusions for qualifying individual remittances under the Liberalised Remittance Scheme, remittances made by an International Financial Services Centre unit, and specified payment-purpose categories covered by Rule 220(3). The key compliance point is that “foreign payment” does not automatically mean “Form 145 required”; the remitter should first classify the payment, test taxability, check the Rule 220 exclusions, and retain evidence supporting the conclusion.

Why this question matters after 1 April 2026

For remittances made on or after 1 April 2026, the procedural framework moved from Form 15CA/15CB under the Income-tax Act, 1961 to Form 145/146 under the Income-tax Act, 2025 and Income-tax Rules, 2026. The transition did not make every outward remittance reportable. Instead, Rule 220 continues to distinguish between taxable remittances, non-taxable remittances, cases supported by an Assessing Officer certificate, cases requiring an accountant’s certificate, and excluded categories.

For the broader transition from the old forms to the new framework, see our guide: Form 15CA/15CB Is Now Forms 145/146.

1. Individual remittances under the Liberalised Remittance Scheme

The Income Tax Department’s Form 145 FAQ states that Form 145 is not required where an individual makes a remittance that does not require prior RBI approval, including qualifying payments under the Liberalised Remittance Scheme. This exclusion should not be read as a blanket rule that every individual remittance is outside Form 145. The remitter should still verify that the payment falls within the relevant RBI framework and that no separate tax-withholding or reporting obligation is triggered by the underlying transaction.

Practical control: keep the bank advice, purpose code, LRS declaration and transaction documents together. If the remittance is connected with acquisition of property, securities, gifts, professional services, royalties or another transaction capable of generating India-source income for the recipient, separately test the taxability and withholding position rather than relying only on the fact that the bank processes the payment under LRS.

2. Remittances made by an IFSC unit

The Department’s Form 145 guidance also identifies remittances made by a unit of an International Financial Services Centre as an excluded category. This is relevant for treasury, fund, leasing and financial-service operations that may make frequent cross-border payments. The exclusion should be documented at the entity level: the exact remitting unit, its IFSC status and the regulatory basis for that status should be available in the compliance file.

A common operational risk is using a group-level vendor or tax rule without checking which legal entity actually makes the payment. Where one group company is an IFSC unit and another is not, the Form 145 conclusion may differ even for economically similar payments.

3. Specified payment-purpose categories under Rule 220(3)

Rule 220 also carves out specified payment categories for which the information requirement does not apply. In practice, this means the RBI purpose code and the legal character of the payment need to agree. Finance teams should not treat a purpose code as a clerical banking field; it can affect whether the remittance falls within the statutory reporting framework.

A defensible process is to map each outward-remittance purpose code to the underlying invoice, agreement and accounting ledger. If the narrative in the contract says “technical consultancy” while the bank instruction uses a generic non-taxable code, the mismatch should be resolved before remittance rather than after a tax query.

What if the payment is taxable?

Where the payment is chargeable to tax in India, Rule 220 determines which part of Form 145 applies. Part A generally covers taxable remittances where the amount or aggregate during the tax year does not exceed ₹5 lakh. Part B applies where the threshold is exceeded and the remitter has obtained the relevant Assessing Officer certificate or order. Part C applies where the threshold is exceeded and an accountant’s certificate in Form 146 has been obtained. If Part B is furnished, the new framework removes the need for duplicative Part C certification.

For the CA-certificate route, see our dedicated article: When Is Form 146 Required in 2026?.

What if the payment is not taxable?

Part D of Form 145 is the reporting route for a non-taxable remittance that is not otherwise excluded under Rule 220(3). This distinction is important: “not taxable” does not necessarily mean “no Form 145.” A remittance may be non-taxable and still require Part D, unless it falls within one of the specific exclusions.

A practical decision sequence before every foreign remittance

Step 1 — Identify the legal recipient and country of residence. Confirm whether the recipient is a non-resident individual, foreign company or another foreign person and collect its tax identification details.

Step 2 — Characterise the payment. Determine whether the amount is for goods, services, royalty, interest, reimbursement, capital account transaction, gift, investment or another category. Avoid relying only on the invoice caption.

Step 3 — Test Indian taxability and treaty relief. Consider the Income-tax Act, 2025, the relevant DTAA, beneficial ownership, permanent establishment or fixed-base issues where relevant, and any withholding provision.

Step 4 — Check Rule 220 exclusions. Specifically test whether the remittance falls within the LRS/individual exclusion, IFSC-unit exclusion or a specified purpose-code category.

Step 5 — If not excluded, select Part A, B, C or D. The ₹5 lakh threshold is an aggregate tax-year test for the taxable-remittance route, so one-off transaction review is not always enough.

Step 6 — Preserve evidence. Keep the invoice, agreement, taxability note, treaty documents, TRC/Form 10F equivalent documentation where relevant, AO certificate if obtained, Form 146 where applicable, purpose code and bank remittance proof.

Example 1: Individual education remittance under LRS

An Indian resident individual remits university fees abroad through the authorised dealer under an eligible LRS purpose and no prior RBI approval is required. If the transaction falls squarely within the Department’s stated individual/LRS exclusion, Form 145 may not be required. The bank and tax file should nevertheless retain the university invoice, payment instructions and purpose-code documentation.

Example 2: Indian company paying a foreign consultant

An Indian company pays ₹8 lakh to a foreign consultant. The payment is not within an individual LRS exclusion or an IFSC-unit exclusion. The company must analyse chargeability under domestic law and the applicable treaty. If the amount is taxable and no AO certificate is obtained, the Form 146 plus Form 145 Part C route may apply. If the payment is genuinely non-taxable and not covered by Rule 220(3), Part D may still be required.

Example 3: IFSC unit making a cross-border payment

A qualifying IFSC unit remits an amount to a foreign service provider. The Form 145 FAQ identifies remittances by an IFSC unit as excluded. The compliance file should still evidence the identity of the remitting IFSC unit, regulatory status, contract, invoice, withholding analysis and bank trail so that the basis of non-filing is clear.

Common mistakes to avoid

Mistake 1 — Assuming every foreign remittance needs Form 145. Rule 220 contains exclusions, and filing a form unnecessarily is not a substitute for correct classification.

Mistake 2 — Assuming every non-taxable remittance is exempt from Form 145. Part D exists precisely because some non-taxable remittances remain reportable.

Mistake 3 — Looking only at one payment instead of the tax-year aggregate. The ₹5 lakh threshold for taxable remittances is tested with reference to the amount or aggregate of payments during the tax year.

Mistake 4 — Treating the bank purpose code as determinative without reconciling it to the contract and tax analysis.

Mistake 5 — Preparing Form 146 after initiating the remittance. The tax, treaty and certification workflow should be completed before money is sent.

FAQs

Is Form 145 required for every outward remittance?

No. Rule 220 and the Income Tax Department’s Form 145 guidance provide specific exclusions. The payment must first be classified and tested against those exclusions.

If a remittance is not taxable in India, is Form 145 automatically not required?

No. A non-taxable remittance may fall under Part D unless it is specifically excluded under Rule 220(3) or another applicable exclusion.

Does the ₹5 lakh threshold mean Form 145 is not required below ₹5 lakh?

No. For taxable remittances, the threshold helps determine the applicable part of Form 145. It is not a general exemption from reporting.

When is Form 146 relevant?

Form 146 is the accountant’s certificate used where a taxable remittance or aggregate taxable remittances exceed ₹5 lakh during the tax year and the remitter uses the Part C route rather than an Assessing Officer certificate/order route.

When should Form 145 be filed?

The Department states that there is no separate fixed calendar due date; it is an event-based form and must be furnished before the remittance is made.

Primary sources

Income Tax Department — Form 145 User Manual.

Income Tax Department — Rule 220 of the Income-tax Rules, 2026.

Income Tax Department — Form 145 FAQs.

How PGT & Associates can help

Cross-border payments can involve overlapping income-tax, treaty, withholding and FEMA questions. PGT & Associates assists businesses and professionals with foreign-remittance taxability reviews, Form 145/146 workflows, DTAA analysis, withholding positions and supporting documentation. For a transaction-specific review, contact PGT & Associates before the remittance is processed.

Disclaimer: This article is for general professional information and does not constitute legal, tax or investment advice. The correct treatment depends on the facts, transaction documents, recipient status, applicable treaty, RBI/FEMA framework and law in force on the remittance date.