Many businesses today make international payments through employees’ or directors’ personal credit cards for convenience and faster processing. Common examples include payments for software subscriptions, cloud services, online advertisements, website hosting, AI tools, and foreign consultancy services.
However, companies often overlook an important point — merely because the payment is made through a personal credit card does not mean regulatory compliances are avoided.
Why This Becomes a Compliance Risk
Under Indian regulations, the nature of the transaction is more important than the mode of payment. If the payment is ultimately for business purposes and is made to a foreign entity, various FEMA and Income-tax compliances may still apply.
In many cases, companies later reimburse such expenses to employees and record them in the books of accounts. During assessments or audits, authorities may examine whether:
- TDS was applicable;
- Foreign remittance compliances were followed;
- Form 145 / 146 (earlier Form 15CA / 15CB) was required;
- Equalisation levy provisions apply;
- Proper documentation was maintained.
Common Transactions Covered
The following payments commonly create exposure:
- Google / Meta advertisement payments
- Foreign software subscriptions
- SaaS platform charges
- Cloud hosting expenses
- AI tools and online applications
- Foreign consultancy or professional fees
- International subscription platforms
Possible Consequences of Non-Compliance
Non-compliance may result in:
- Disallowance of expenses under Income-tax Act
- Interest and penalties for TDS defaults
- FEMA-related scrutiny
- Difficulties during statutory audit or due diligence
- Penalties which may extend up to Rs. 1,00,000 or more in certain cases
Practical Steps for Businesses
Businesses should establish an internal process whereby all international payments — even those made through employees’ personal cards — are reviewed before payment from:
- TDS applicability perspective
- FEMA compliance perspective
- Form 145 / 146 requirement
- Equalisation levy applicability
Maintaining invoices, agreements, payment proofs, and purpose documentation is equally important.
Final Thoughts
International digital payments have become routine for businesses, but compliance requirements continue to apply irrespective of the payment channel used.
A small procedural lapse today can result in substantial tax and regulatory exposure later. Businesses should therefore ensure that all foreign payments are properly reviewed and documented before processing.
Need assistance with international payment compliances?
We assist businesses in reviewing foreign remittances, evaluating TDS and FEMA applicability, assessing Form 145 / 146 requirements, and establishing proper compliance processes for international payments made through company accounts or employee credit cards.
Author
Pavan Goyal and Associates (Chartered Accountants)
Office No. B212, GO Square, Mankar Chowk, Wakad, Pune 411057
Email – office@goyalca.com
Contact – 9762763351