TCS on Foreign Remittance & Sales of Goods Applicable With Effect From 01.10.2020

TCS amended Provisions:-

Secion 206C(1G)(a) – TCS on foreign remittance through Liberalised Remittance Scheme (LRS),

Section 206C(1G)(b) – TCS on selling of overseas tour package

Section 206C(1H) – TCS on sale of any goods [except goods on which TCS applicable as per Section 206C (1), 206C (1F) and 206C (1G)].

These amended provisions of TCS will be effective from 1^st October, 2020 instead of 1^st April, 2020.

1. Section 206C(1G)(a) – TCS on foreign remittance through Liberalised Remittance Scheme (LRS)

• An authorised dealer receiving an amount or an aggregate of amounts of seven lakh rupees or more in a financial year for remittance out of India under the LRS of RBI, shall be liable to collect TCS, if he receives sum in excess of said amount from a buyer being a person remitting such amount out of India, at the rate of five per cent.
• In non-PAN/Aadhaar cases the rate shall be ten per cent.
• This section will not be applicable in following cases:
  • If the buyer is liable to deduct TDS under any other provisions and has deducted
  • If a buyer is CG, SG, an embassy, a high commission, a legation, a commission, a consulate, the trade representation of a foreign state, a local authority or any other person as notified by CG
• “authorised dealer” is proposed to be defined to mean a person authorised by the Reserve Bank of India under sub-section (1) of section 10 of Foreign Exchange Management Act, 1999to deal in foreign exchange or foreign security

2. Section 206C(1G)(b) – TCS on selling of overseas tour package

• A seller of an overseas tour program package who receives any amount from any buyer, being a person who purchases such package, shall be liable to collect TCS at the rate of five per cent.
• In non-PAN/ Aadhaar cases the rate shall be ten per cent.
• There is no monetary limit for this transaction, irrespective of any amount TCS must be collected by seller of that package
• This section will not be applicable in following cases:
  • If the buyer is liable to deduct TDS under any other provisions and has deducted
  • If a buyer is CG, SG, an embassy, a high commission, a legation, a commission, a consulate, the trade representation of a foreign state, a local authority or any other person as notified by CG
• “Overseas tour program package” is proposed to be defined to mean 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 expense of similar nature or in relation thereto.

The Extract of Provisions of section 206C(1G) is as under:-

[(1G) Every person,—

(a) being an authorised dealer, who receives an amount, for remittance out of India from a buyer, being a person remitting such amount out of India under the Liberalised Remittance Scheme of the Reserve Bank of India;

(b) being a seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchases such package,

shall, at the time of debiting the amount payable by the buyer or at the time of receipt of such amount from the said buyer, by any mode, whichever is earlier, collect from the buyer, a sum equal to five per cent of such amount as income-tax:

Provided that the authorised 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 and is for a purpose other than purchase of overseas tour program package:

Provided further that the sum to be collected by an authorised 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, where the amount being remitted is for a purpose other than purchase of overseas tour program package:

Provided also that the authorised dealer shall collect a sum equal to one half 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 the amount being remitted out is a loan obtained from any financial institution as defined in section 80E, for the purpose of pursuing any education:

Provided also that the authorised dealer shall not collect the sum on an amount in respect of which the sum has been collected by the seller:

Provided also that the provisions of this sub-section shall not apply, if the buyer is,—

 (i)  liable to deduct tax at source under any other provision of this Act and has deducted such amount;

(ii)  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 or 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.

Explanation.—For the purposes of this sub-section,—

 (i)  “authorised dealer” means a person authorised by the Reserve Bank of India under sub-section (1) of section 10 of the Foreign Exchange Management Act, 1999 (42 of 1999) to deal in foreign exchange or foreign security;

(ii)  “overseas tour programme 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.

3. Section 206C(1H) – TCS on sale of any goods [except goods on which TCS applicable as per Section 206C(1), 206C (1F) and 206C (1G)]

• A seller of goods is liable to collect TCS at the rate of 0.1 per centon consideration received from a buyer in a previous year in excess of fifty lakh rupees.
• In non-PAN/ Aadhaar cases the rate shall be five per cent.
• Only those sellers whose total sales, gross receipts or turnover from the business carried on by it exceed ten crore rupees during the financial year immediately preceding the financial year, shall be liable to collect such TCS.
• Central Government may notify person, subject to conditions contained in such notification, who shall not be liable to collect such TCS.
• No TCS is to be collected from the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to conditions as prescribed in such notification.
• No such TCS is to be collected, if the seller is liable to collect TCS under other provision of section 206C such as Section 206C (1), 206C (1F) and 206C (1G) or the buyer is liable to deduct TDS under any provision of the Act and has deducted such amount.

The Extract of Provisions of section 206C(1H) is as under:-

(1H) Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value exceeding fifty lakh rupees in any previous year, other than the goods being exported out of India or goods covered in sub-section (1) or sub-section (1F) or sub-section (1G) shall, at the time of receipt of such amount, collect from the buyer, a sum equal to 0.1 per cent of the sale consideration exceeding fifty lakh rupees as income-tax:

Provided that if the buyer has not provided the Permanent Account Number or the Aadhaar number to the seller, then the provisions of clause (ii) of sub-section (1) of section 206CC shall be read as if for the words “five per cent”, the words “one per cent” had been substituted:

Provided further that the provisions of this sub-section shall not apply, if the buyer is liable to deduct tax at source under any other provision of this Act on the goods purchased by him from the seller and has deducted such amount.

Explanation.—For the purposes of this sub-section,—

(a) “buyer” means a person who purchases any goods, but does not include,—

(A) the Central Government, a State Government, an embassy, a High Commission, legation, commission, consulate and the trade representation of a foreign State; or

(B) a local authority as defined in the Explanation to clause (20) of section 10; or

(C) a person importing goods into India or 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;

(b) “seller” means a person whose total sales, gross receipts or turnover from the business carried on by him exceed ten crore rupees during the financial year immediately preceding the financial year in which the sale of goods is carried out, not being a 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.

A. FAQs on New TCS provisions applicable from 01.10.2020

Q 1. Whether TCS on foreign remittance through Liberalised Remittance Scheme (LRS) will be applicable on entire amount of remittance or only on excess of Rs 7 Lacs?

Ans: TCS shall be applicable on amount in excess of ₹ 7 lakhs in a financial year and not on the total amount.

Q 2. Whether all foreign remittance transactions through Liberalised Remittance Scheme (LRS) will be charged at 5%?

Ans: Normally, Yes all remittance out of India under the LRS of RBI, shall be liable to collect TCS at 5%. But in non-PAN/Aadhaar cases the rate shall be 10% But please note that in cases where the amount is remitted for the purpose of pursuing education through a loan obtained from any financial institute, rate of TCS shall be 0.5% on amount exceeding ₹ 7 lakhs.

Q 3. Will GST be applied on Tax collected at source under Liberalised Remittance Scheme (LRS)?

Ans: The GST will continue to apply on currency conversion and on Remittance Service Charge. The same will not be applied on the tax collection.

Q 4. What are the scenarios under which the provision will not apply?

Ans: The provision will not apply in case the remitter is liable to deduct tax at source under any other provision of the act and the amount has been deducted. It will also not apply if the remitter is the government or any another person notified by the government.

Practical Example of TCS on foreign remittance through Liberalised Remittance Scheme (LRS)

Case: Mr. A has made remittance during FY 2020-21 as follows:

Transaction 1 – Rs. 5,00,000

Transaction 2 – Rs 8,00,000

Transaction 3 – Rs 1,50,000

TCS applicability transaction wise is as under:

Transaction	TCS Applicability
Transaction 1 – Rs. 5,00,000	No Tax will be collected since the amount is below Rs 7,00,000/-
Transaction 2 – Rs 8,00,000	TCS will be applicable on Rs 6,00,000 [(Rs 5,00,000 + Rs 8,00,000 = Rs 13,00,000) – Rs 7,00,000 = Rs 6,00,000]
Transaction 3 – Rs 1,50,000	TCS will be applicable on Rs 1,50,000 entirely since Rs 7,00,000 limit has been exceeded in transaction 2 only.

We have tried to cover most of the doubts.