The population of India is 125 crores and only 1.46 crores people pay tax in India i.e. around 1.15% people pay tax. Looking to lower number of people paying taxes Govt. is making way to widen tax base by collecting tax from source itself. It means seller shall collect certain percentage of tax from buyer and deposit to credit of Central Govt. This will help Govt. in regulating the people who have buying capacity but does not pay tax.
2. WHO IS REQUIRED TO COLLECT TAX ON FOREIGN REMITTANCE
From 1st October 2020, Authorized Dealers like banks are required to collect tax @ 5% if an individual remits an amount of 7 lacs or more out of India under Liberalized Remittance Scheme. If buyer does not furnishes PAN than tax shall be collected @ 10%. This provision is inserted to put check whether adequate income has been declared in return of income where amount is being send outside India.
The rate has been reduced to 0.5% in case amount remitted is towards repayment of education loan taken from bank. If buyer does not furnish PAN than TCS shall be collected @ 5%.
3. WHAT IS LIBERIALISED REMITTANCE SCHEME
Under Liberalized Remittance Scheme all individuals including minors are allowed to freely remit up to 2.5 lakh dollars per financial year (Apr-Mar) for making investment in shares, debt instruments, buying immovable properties, paying expenses related to travelling, medical treatment, studying, gifts and donations, maintenance of close relatives and so on.
4. WHAT ARE RATES OF TCS ON FOREIGN REMITTANCE
|Particulars||Rate||Rate if buyer does not furnishes PAN|
|If buyer remits an amount of 7 lakhs or more||5%||10%|
|If education loan is remitted||0.5%||5%|
5. WHAT IS THE AMOUNT ON WHICH TAX SHALL BE COLLECTED
Tax shall be collected from 01/10/2020 but threshold limit of 7 lakhs shall be calculated from 01/04/2020.
6. NON-APPLICABILITY OF PROVISION RELATED TO TCS ON FOREIGN REMITTANCE
TCS is not required to be collected if buyer is-
7. OUR COMMENTS
Govt. has introduced 3 TCS provisions in Budget 2020 where it has levied TCS on foreign remittance, overseas tour package and sale of goods. It is taken bold move where it is trying to regulate an unorganized group who does not pay tax. In years to come things are going to change in drastic manner.