Introduction: This article provides insights into the adjustment of Tax Collection at Source (TCS) rates for overseas tour packages and funds remitted outside India. It outlines the recent changes in TCS rates, their effective date, and the businesses where TCS is collected under the Income Tax Act, 1961.
Analysis:
(a) Tax Collection at Source (TCS) Rates: The Finance Act, 2023 has introduced amendments to section 206C(1G) of the Income-tax Act, 1961, impacting TCS rates. The amendments include:
- An increase in TCS rate from 5% to 20% for remittances under the Liberalised Remittance Scheme (LRS) and purchase of overseas tour program packages.
- Removal of the Rs 7 lakh threshold for triggering TCS on LRS, except for remittances for education and medical purposes.
However, TCS does not apply to remittances for education and medical purposes financed by loans. These changes will be effective from 1st October 2023.
(b) Implementation Timeline: The increased TCS rate of 20% will come into effect from 1st October 2023. Until 30th September 2023, the earlier TCS rates (pre-amendment) will continue to apply. The revised TCS rates for different purposes are as follows:
- LRS for education, financed by loan: Nil up to Rs 7 lakh, 0.5% above Rs 7 lakh.
- LRS for medical treatment/education (other than financed by loan): Nil up to Rs 7 lakh, 5% above Rs 7 lakh.
- LRS for other purposes: Nil up to Rs 7 lakh, 20% above Rs 7 lakh.
- Purchase of overseas tour program package: 5% till Rs 7 lakh, 20% above Rs 7 lakh.
(c) List of Businesses where TCS is Collected: TCS is collected on various transactions, including:
- Sale of alcoholic liquor for human consumption
- Sale of tendu leaves
- Sale of timber obtained under a forest lease or other modes
- Sale of other forest produce
- Sale of scrap
- Sale of minerals (coal, lignite, iron ore)
- Sale of motor vehicles of value exceeding ten lakh rupees
- Sale of overseas tour program packages
TCS is also applicable on lease/license transactions, contracts, and transfers related to parking lots, toll plazas, and mining/quarrying. It is also applicable on remittances under the Reserve Bank of India’s Liberalised Remittance Scheme and sale of goods exceeding Rs 50 lakhs. The applicability of TCS is subject to conditions specified in the Income-tax Act.
Conclusion: The adjustment of TCS rates for overseas tour packages and funds remitted is a significant change introduced by the Finance Act, 2023. The article clarifies the changes in TCS rates, the timeline for their implementation, and the businesses where TCS is collected. This information will help individuals and businesses understand the impact of these changes on their financial transactions.
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GOVERNMENT OF INDIA
MINISTRY OF FINANCE
DEPARTMENT OF REVENUE
RAJYA SABHA
UNSTARRED QUESTION NO. 2152
ANSWERED ON 08.08.2023
READJUSTMENT OF TCS RATES
2152 DR. PRASHANTA NANDA:
Will the Minister of FINANCE be pleased to state:
(a) the details of the Tax Collection at Source (TCS) rates for overseas tour packages and funds remitted;
(b) the time from which these adjusted rates shall be implemented; and
(c) the list of businesses in which TCS has been collected under the existing provisions of the Income Tax Act, 1961?
ANSWER
MINISTER OF STATE IN THE MINISTRY OF FINANCE
(SHRI PANKAJ CHAUDHARY)
(a) Finance Act, 2023 has amended sub-section (1G) of section 206C of the Income-tax Act, 1961 (hereinafter referred to as ‘the Act’) to, interalia,
(i) increase the rate of TCS from 5% to 20% for remittance under Liberalised Remittance Scheme (LRS) as well as for purchase of overseas tour program package; and
(ii) remove the threshold of Rs 7 lakh for triggering TCS on LRS.
These two changes did not apply when the remittance is for education and medical purpose.
Vide Press Release dated 28th June 2023 issued by Ministry of Finance it was announced that:-
(i) Threshold of Rs. 7 lakh per financial year per individual in clause (a) of sub-section (1G) of section 206C shall be restored for TCS on all categories of LRS payments, through all modes of payment, regardless of the purpose: Thus, for first Rs 7 lakh remittance under LRS there shall be no TCS. Beyond this Rs 7 lakh threshold, TCS shall be at the rate of –
a) 5% (if remittance for education is financed by loan taken from a financial institution)
b) 5% (in case of remittance for education/medical treatment)
c) 20% for others.
(ii) For purchase of overseas tour program package under clause (b) of sub-section (1G) of section 206C, the TCS shall continue to apply at the rate of 5% for the first Rs 7 lakh per individual per annum, the 20% rate will only apply for expenditure above this limit.
(b) The increase in TCS rates to 20% shall only be applicable from 1st October, 2023.
Till 30th September, 2023, earlier rates (prior to amendment of Finance Act, 2023), shall continue to apply. Various TCS rates are as below:
|
Nature of payment (1) |
Earlier rate before Finance Act, 2023(2) |
New rate w.e.f 1st October, 2023(3) |
| LRS for education, financed by loan from financial institution | Nil upto Rs 7 lakh 0.5% above Rs 7 Lakh | Nil upto Rs 7 lakh 0.5% above Rs 7 Lakh |
| LRS for Medical treatment/ education (other than financed by loan) | Nil upto Rs 7 lakh 5% above Rs 7 Lakh | Nil upto Rs 7 lakh 5% above Rs 7 Lakh |
| LRS for other purposes | Nil upto Rs 7 lakh 5% above Rs 7 Lakh | Nil upto Rs 7 lakh 20% above Rs 7 Lakh |
| Purchase of Overseas tour program package | 5% (without threshold) | 5% till Rs 7 Lakh, 20% thereafter |
(c) TCS is being collected on sale of following items: alcoholic liquor for human consumption, tendu leaves, timber obtained under a forest lease or any other mode, any other forest produce, scrap, minerals (being coal or lignite or iron ore), motor vehicle of value exceeding ten lakh rupees and overseas tour program package.
TCS is also being collected on amount received by any person granting a lease/license or entering into a contract or transferring a right/interest in any parking lot or toll plaza or in mining and quarrying.
TCS is also applicable on amount remitted under Liberalised Remittance Scheme of the Reserve Bank of India and sale of goods exceeding Rs 50 lakhs.
Applicability of TCS is subject to conditions laid down in the Act.
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