Section 206(1G): TCS on Outward Remittance under Liberalized Remittance Scheme (LRS)
Government always try to combat the situation of tax avoidance and evasion, all TDS and TCSprovisions 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 206C of Income Tax Act 1961 w.e.f. 01.10.2020.
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:
| S.No. | Particulars | If PAN is Available | If PAN is not Available |
| 1. | Overseas Tour Program (Payment for Purchase of Ticket, Booking Hotel, etc.) including payment under LRS | Flat 5% of Remittance Amount | @10% instead of 5% |
| 2. | LRS (Except) than Overseas Tour Program | 5% of Remittance Amount in Excess of Rs. 7.00 Lacs during FY | @10% instead of 5% |
| 3. | Remittance for Travel and Expenditure 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% |
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 (Except payment is for Purchase of Overseas Tour Program Package).
(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.
(Except payment is for Purchase of Overseas Tour Program Package).
(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 :
Notification No. 99/2022-Income Tax Dated: 17th August, 2022
Notification No. 20/2022-Income Tax Dated: 30th March, 2022
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) |
Author Bio
First of all,Thank You Rahul Sir for bringing such an insightful and crisp analysis to all of us. But I have different view regarding the example quoted: that TCS on gift and family maintenance should be on remittance in excess of Rs. 7lak. What’s your take on it?