TCS

TCS PROVISIONS FROM 1ST APRIL 2020

TCS  ON OVERSEAS REMITTANCES

The Finance Act, 2020 has widened the scope of tax collection at source by inserting sub-section (1G) in Section 206C whereby, every person, being an authorized dealer, who receives  Rs 7 lakh or more in a financial year for remittances out of India from a buyer under Liberalized Remittance Scheme of the RBI shall be required to collect tax at source at the rate of 5% at the time of debiting the amount to the buyers or at the time of receipt of such amount from the buyer by any mode, whichever is earlier. 

In case of non-furnishing of PAN or Aadhaar by such a buyer, the tax shall be required to be deducted at the rate of 10% under section 206CC of the Act. It has been clarified that in case the nature of the payment is liable for deduction or collection at source or any other provisions of the Act, then tax shall not be required to be collected at source on such payment.

This amendment will have far reaching implication as remittance being sent by all residents for the various purposes including education of children, medical treatment or investment otherwise shall be liable for tax collection at source.

This amendment shall be effective w.e.f 01.04.2020. This amendment will have far reaching implication as remittance being sent by all residents for various purposes including education of children, medical treatment or investment otherwise shall be liable for tax collection at source. The objective of this scheme is to get hold of persons sending foreign remittances abroad and not filing their income tax returns.    

If tax is not payable or not due on income, then a refund can be claimed by filing the income tax return.

Alternatively, to avoid tax deduction or collection, these persons can apply under section 197 for no deduction or deduction of tax at a lower rate.

TCS ON OVERSEAS TOUR PACKAGE

The Finance Act, 2020 under the above new sub-section (1G) of section 206C has also introduced the collection of tax at source by the seller of the overseas tour package. The seller of the overseas tour package is required to collect tax at source at the rate of 5% at the time of debiting the amount to the purchase of the overseas tour package or at the receipt of such amount, whichever is earlier. No threshold has been fixed in respect of the overseas tour program package. It means that even for smaller payments, the seller is required to collect tax at source. In case of not furnishing of PAN or Adhaar, the tax shall be collected at the rate of 10% under section 206CC of the Income Tax Act, 1961.

 The Overseas tour program package is defined to mean any tour program which offers a visit to a country or territory outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto.

However, in case the payment has been liable for tax deduction at source or tax is to be deducted under any other provisions of the Act, then tax shall not be required to be collected under this provision.

TCS ON SALE OF GOODS

The Finance Act, 2020 has introduced sub-section (1H) under section 206C. Under the newly inserted sub-section, every seller whose turnover exceeds Rs 10 crore in the preceding previous year is required to collect tax at source at the rate of 0.1% of the sale consideration exceeding Rs 50 lakhs in respect of the sale of any goods. Thus, every seller whose turnover exceeding Rs. 10 crores in the previous year, will be required to collect at source, from every buyer if the total purchases of such buyer exceed Rs  50 lakhs. It may be noted that the tax is required to be collected only in respect of sale value exceeding Rs 50 lakhs during the year.

In case such a buyer does not have PAN or Adhaar number, then the rate of collection shall be 1% under section 206CC of the Income Tax Act, 1961.

The seller shall be required to maintain an account of the TCS Collected, issue TCS certificate and file statement of such tax collected.

The buyer on its own will be required to maintain the account of TCS paid by it, the credit of the same in the statement filed by seller and claim of such TCS in the tax return.

Seller shall be required to issue a TCS certificate and such TCS credit will be reflected in 26AS.

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