Section 206(1G): TCS on Outward Remittance under Liberalized Remittance Scheme (LRS) (After Budget 2023)
Government always try to combat the situation of tax avoidance and evasion, all TDS and TCS provisions are made part of our Direct Tax Regime with this object. With changed economic Scenario it seems inevitable to introduce new entries and modification in existing provisions. In this series Finance Act 2020 introduced new section (1G) in section 206Cof Income Tax Act 1961 w.e.f. 01.10.2020. Recently budget 2023 has introduced some significant changes, I have tried to incorporate my view on the same in following analysis.
The purpose of this clause is to collect tax on (a). Remittances made under Liberalized Remittance Scheme (LRS) of Reserve Bank of India and (b). Remittance made towards Overseas Tour Program Package.
Liberalized Remittance Scheme (LRS) : – Under LRS Scheme, an Individual person who is resident in India as per FEMA is permitted to remit outside India fund up to US$ 2,50,000 per financial year (April to March) without any approval of RBI for any permitted current account or capital account transactions or both such as opening foreign currency account abroad, purchase of property or making investments abroad, private visit, gift/donation, business trip, medical treatment, studies abroad, going abroad on employment, etc. This scheme is available only to Individuals (including minors) and not to corporates, Partnership firms, LLP, HUF, etc.
Overseas Tour Program Package means any tour package which offers visit to a country or countries or territory or territories 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.
Who Has to Collect Tax : (a). An Authorized Dealer who remit amount out of India and (b). Seller of Overseas Tour Program Package.
Rate of Tax to be Collected:
| Upto 30.06.2023 | On and After 01.07.2023 | ||||
| S.No. | Particulars | If PAN is Available | If PAN is not Available | If PAN is Available | If PAN is
not Available |
| 1. | Overseas Tour Program (Payment for Purchase of Tocket, Booking Hotel, etc.) | Flat 5% of Remittance Amount | @10% instead of 5% of Remittance Amount | Flat 20% of Remittance Amount | Flat 40% of Remittance Amount |
| 2. | LRS – For Education and Medical Treatment | 5% of Remittance Amount in Excess of Rs. 7.00 Lacs during FY | @10% instead of 5% of Remittance Amount in Excess of Rs. 7.00 Lacs during FY | 5% of Remittance Amount in Excess of Rs. 7.00 Lacs during FY | @10% instead of 5% of Remittance Amount in Excess of Rs. 7.00 Lacs during FY |
| 3. | Remittance related to Studies abroad, Where source of Fund is Educational Loan | 0.5 % of the remittance amount in excess of 7.00 Lacs during FY | @5% instead of 0.5% of Remittance Amount in Excess of Rs. 7.00 Lacs during FY | 0.5 % of the remittance amount in excess of 7.00 Lacs during FY | @5% instead of 0.5% of Remittance Amount in Excess of Rs. 7.00 Lacs during FY |
| 4. | LRS – Other than Education and Medical Treatment | 5% of Remittance Amount in Excess of Rs. 7.00 Lacs during FY | @10% instead of 5% | Flat 20% of Remittance Amount | Flat 40% of Remittance Amount |
No Tax is Collectible:
(a). The Authorized Dealer shall not collect the sum if the amount or aggregate of the amounts being remitted by a buyer is less than seven lakh rupees in a financial year (Only If payment is for Medical and Education Purpose).
(b).Sum to be collected by an authorized dealer from the buyer shall be equal to five per cent of the amount or aggregate of the amounts in excess of seven lakh rupees remitted by the buyer in a financial year, if amount remitted is more than Seven Lacs.
(Only If Payment is for Medical and Education Purpose).
(c). The Authorized Dealer shall not collect the sum on an amount in respect of which the sum has been collected by the seller.
(d).Person responsible for Tax Collection is liable to deduct tax at source under any other provision of this Act and has deducted such amount.
(e). Payment is collected from the Central Government, a State Government, an embassy, a High Commission, a legation, a commission, a consulate, the trade representation of a foreign State, a local authority as defined in the Explanation to clause (20) of section 10. and
(f). Any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.
Notification for Exemption Issued are as follows :
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 17th August, 2022
INCOME-TAX
S.O. 3878(E).—In exercise of the powers conferred by clause (ii) to fifth proviso to sub-section (1G) of section 206C of the Income-tax Act, 1961 (43 of 1961) (hereinafter referred to as “Act”) and in suppression of the notification of the Government of India, Central Board of Direct Taxes published in the Gazette of India, Extraordinary, Part II, Section 3, Sub-section (ii) vide number S.O. 1494(E), dated the 30th March 2022, except as respects things done or omitted to be done before such suppression, the Central Government hereby notifies that the provisions of sub-section (1G) of section 206C of the Act shall not apply to a person (being a buyer) who is a non-resident in terms of section 6 of the Act and who does not have a permanent establishment in India.
2. This notification shall come into force with effect from the date of publication of this notification in the Official Gazette.
[Notification No. 99/2022/F. No. 370142/9/2022-TPL Part (2)]
MRINALINI KAUR SAPRA, Director
MINISTRY OF FINANCE
(Department of Revenue)
(CENTRAL BOARD OF DIRECT TAXES)
NOTIFICATION
New Delhi, the 30th March, 2022
INCOME-TAX
S.O. 1494(E).—In exercise of the powers conferred by clause (ii) to fifth proviso to sub-section (1G) of section 206C of the Income-tax Act, 1961 (43 of 1961)(hereinafter referred to as ‘Act’), the Central Government hereby notifies that the provisions of sub-section (1G) of section 206C shall not apply to an individual who is not a resident in India in terms of clause (1) and clause (1A) of section 6 of the Act, and who is visiting India.
2. This notification shall come into force with effect from the date of publication of this notification in the Official Gazette.
[Notification No. 20/2022/F. No.370142/9/2022-TPL]
ANKIT JAIN, Under Secy.
Government of India
Ministry of Finance
Department of Revenue
Central Board of Direct Taxes
New Delhi, 31st March, 2022
PRESS RELEASE
Central Government relaxes provisions of TCS under section 206C(1G) of the Income-tax Act, 1961 in respect of non-resident individuals visiting India
Section 206C (1G) of the Income-tax Act, 1961 (“the Act”) provides for collection of tax by a seller of an overseas tour program package from a buyer, being a person purchasing such package, at the rate of 5% of the amount of the package.
Representations were received from domestic tour operators who were facing difficulties in collection of tax from non-resident individuals visiting India who were booking overseas tour package from such domestic tour operators. Since such persons may not have a PAN, tax is required to be collected at higher rates. Further, such non-residents may find it difficult to furnish their ITR and claim refunds.
In order to remove such difficulties, the Central Government, in exercise of powers conferred under section 206C(1G) of the Act, has specified that the provisions of the said section shall not apply to a buyer being an individual who is not a resident in India in terms of clause (1) and clause (1A) of section 6 of the Act and who is visiting India. Hence, a domestic tour operator is not required to collect tax on sale of overseas tour package to non-resident individuals visiting India.
Notification No. 20 of 2022 dated 30.03.2022 has also been issued and is available on www.incometaxindia.gov.in under the Notification Section.
(Surabhi Ahluwalia)
Commissioner of Income Tax
(Media & Technical Policy)
Official Spokesperson, CBDT
Illustrations:
Customer : Mr. X
| Transaction Date | Amount Remitted | Cumulative Remitted Amount | Purpose of Remittance | Applicable TCS |
| 03.07.2022 | 800000 | 800000 | Medical | 2500 (5% of remitted amount -700000) |
| 05.10.2022 | 650000 | 1450000 | Gift | 32500(5% of Remitted Amount) |
| 22.10.2022 | 120000 | 1570000 | Travel | 6000 (5% of Remitted amount) |
| 10.11.2020 | 525000 | 2095000 | Education (Out of Education Loan) | 2650 (0.5% of remitted amount) |
| 12.01.2023 | 400000 | 2495000 | Family Maintenance | 20000 (5% of remitted amount) |
| 25.01.2023 | 700000 | 3195000 | Education (Out of Personal Savings and not out of Loan) | 35000 (5% of remitted amount) |
Customer : Mr. Y
| Transaction Date | Amount Remitted | Cumulative Remitted Amount | Purpose of Remittance | Applicable TCS |
| 03.07.2023 | 800000 | 800000 | Medical | 2500 (5% of remitted amount -700000) |
| 05.10.2023 | 650000 | 1450000 | Gift | 130000(Flat 20% of Remitted Amount) |
| 22.10.2023 | 120000 | 1570000 | Travel | 24000 (Flat 20% of Remitted amount) |
| 10.11.2023 | 525000 | 2095000 | Education (Out of Education Loan) | 2650 (0.5% of remitted amount in Excess of Rs. 700000 of remitted amount) |
| 12.01.2024 | 400000 | 2495000 | Family Maintenance | 80000 (20% of remitted amount) |
| 25.01.2024 | 700000 | 3195000 | Education (Out of Personal Savings and not out of Loan) | 35000 (5% of remitted amount in excess of Rs. 700000 of remitted amount) |
Author Bio
If traveling on bussiness trip and payment doing from proprietorship firm and that case TCS Applicable or not ?
I HAVE GONE IN A FOREIGN TRIP IN FY2023–24, MAY 2023 AND THE TRAVEL AGENT CHARGED TCS FOR RS 26000// AGAINST TOUR EXPENSES OF RS 529000/.. THIS AMOUNT OF TCS FOR RS 26000/ IS ALSO IN THE 26AS FORM IN THE AY 2024-25.. MY QUERY IS HOW SHALL I SHOW THIS AMT OF TCS IN SAHAJ 1 FORM WHILE FILING I TAX RETURN.. I AMFILING I TAX RETURN ON TDS EACH YEAR. IS THE AMOUNT IS DEDUCTIBLE FRO MY TOTAL TAX? PL ADVISE URGENTLY– U S CHAKRABORTY,, DUMDUM KOLKATA
hello,
is tcs to be charged for non resident client booking tour package for other country booking?
Thanks
I’m a NRI and my parents in India (both Indian residents) want to gift me INR 30,00,000.
Does TCS apply in our case (for gifts)? Who will collect this TCS? And is there a difference between sending the amount directly to my foreign account vs sending it first to my NRO account?
tax is on remittance out of India under Liberalized Remittance Scheme, transferring amount in NRO account not attract tax as it’s remittance which is taxability event and not gift. Gift under LRS is does only attract tax
can this TCS amount be claimed back as a credit while filing income tax returns
yes TCS is at par with TDS and both can be claimed as payment made towards regular assessment
yes TCS is at par with TDS and both can be claimed as payment made towards regular assessments
If a customer done a Gift transaction of Rs. 5 lakh and collected TCS of Rs. 1 lakh and he did another transaction of Rs. 3 lakh for Educational purpose, what will be the TCS amount for the second transaction.
nil
is TCS apply to buy currency from FFMC FOR PRIVATE VISIT ???
no section is applicable to authorised dealers and not money changers
WHAT WILL BE TCS AFTER 30.6.2023 FOR REMITTANCE ABROAD— FOR MAINTENANCE
– GIFT FROM PERSONAL SAVINGS
-EDUCATION ONLY FORM PERSONAL SAVINGS
– PAYING RENT FOR THE FLAT WHERE HE WILL BE RESIDING TO STUDY IN A MBA SCHOOL
sir please refer write ✍️ up diligently, LRS ( TCS is applicable only on Liberalized Remittance Scheme) is categorically defined.