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Budget 2020 proposal on Tax collected at source (TCS)
The tax collected at source (TCS) is the tax payable by a seller which he collects from the purchaser/buyer at the time of sale. Presently, TCS is required to be collected in respect of the business of trading in alcohol, liquor, forest produce, scrap etc.
Budget 2020 proposed to apply TCS provisions on three new categories. Details of transaction, rate and threshold limit:
| Sr. no. | Transaction | Person responsible to deduct TCS | Rate |
| 1 | Remittance under Liberalised Remittance Scheme (LRS) in exceeding INR 0.7 million in a financial year | Authorised dealer bank | 5% (10% for non-PAN/Aadhar cases) |
| 2 | Sale of an overseas tour package | Seller of the tour package | |
| 3 | Purchase of goods exceeding INR 5 million in a financial year | Seller of goods (whose gross receipt/ turnover exceeds INR 100 million in a financial year) | 0.1% (1% for non-PAN/Aadhar cases) |
TCS provision on above transactions is not applicable if remitter/purchaser has deducted TDS under the Act.
Below is my observation on the new TCS provisions:
- For LRS
- Clarity is required from CBDT if TCS is applicable on both capital and current account transaction remitted under LRS.
- The LRS scheme is applicable to resident individuals. Thus, the Scheme is not available to corporates, partnership firms, HUF, Trusts, etc. and hence the TCS is not applicable to them.
- Increase the paperwork for each remittance.
- The loan disbursed to the student for studying abroad would be restricted to only 95%. Thus, the balance needs to be self-funded for studies abroad. Alternatively, the /parents will have to fund the TCS amounts on the Loan.
- Sale of an overseas tour package
- A taxpayer can claim a tax refund by filing an income tax return if the taxpayer falls in a lower tax rate than the TCS.
- Practically difficult in applying this provision in case of booking an overseas tour from a foreign website.
- Is TCS applicable if travel and hotel booking did separately for an overseas tour?
- Purchase of goods
- No exceptions provided for export of goods.
- Higher TCS rate would be applicable in case of a foreign purchaser in the absence of PAN/Aadhar.
- Lead to an increase in cost on account of passing on the TCD withholding to end customer and accordingly the export of goods could become uncompetitive in the foreign market due to higher TCS rate on foreigner purchaser.
- When the foreign buyers don’t have any tax liability in India, the TCS provision should not be made applicable to them. Government/CBDT needs to come out with clarification to exclude the applicability of this TCS provision as the intent is never to tax the foreign buyer of Indian goods.
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Under Budget 2020 proposal does TCS rate for scrap will also change from 1% to 0.1%
Please make it clear or it wil be the same as previous F.Y.
On consideration received in excess of INR 5 million.
Example: If the sale made to the buyer is INR 5.7 million and amount received from the buyer is INR 5.2 million, then only on 0.2 million TCS @ 0.1% needs to be deducted.
Further for sale of goods when TCS s applicable after crossing the limit of % million ??