TCS commonly known as Tax collection at source covered by Section 206(C) of Income Tax Act’1961. TCS is to be collected at the rate of 1% each ‘on alcoholic liquor for human consumption’, ‘on scrap’, ‘on minerals being coal or iron ore’, at the rate of 5% on ‘Tendu leaves’ and at the rate of 2.5% each on ‘timber’, ‘on any other forest produce’ respectively at the time of receiving the payment or debiting the buyer account, whichever is earlier. TCS provisions were also extended to every person who grants lease or license to another person other than public sector company for parking lot, toll plaza, mining and quarrying then he has to also collect the TCS at the rate 2% from the licensee at the time of receiving the payment or debiting the amount, whichever is earlier.
The above-mentioned provision has been kept as it is, and no changes has been made therein. Additionally, in budget 2020, for widening the scope of section 206C following transactions has also been brought under the ambit of TCS provisions:
By bringing the above provision for widening the scope, finance bill has been increased the compliance of TCS and covered the a very large group of assessee who will fall under.
Let’s Discuss the scope, limitation, applicability, compliance and the impact of newly inserted provisions under section 206 (C) of Income tax act’ 1961.
First understand what is LRS ? The Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI) allows resident individuals to remit a certain amount of money during a financial year to another country for investment and expenditure. According to the prevailing regulations, resident individuals may remit up to $250,000 per financial year. In other words it’s a scheme framed by RBI under which an resident individual can sent a sum of $2,50,000 outside India to meet any expenditure like for study in abroad or to make investment in foreign country.
There were no TCS earlier, but now if a resident individual have to send money through authorized dealer in excess of sum of Rs. 7,00,000 (either one time or in totality during the previous year) then authorized dealer must collect TCS at the rate of 5% at the time remitting the money or at the rate of 10% if the remitter does not have pan/aadhaar.
Let’s take examples to understand in more clear way :-
Situation 1. On 21/12/2020 Mr. B (Having a Pan) approaches to ABC authorized dealer and Mr. B has to send a sum of Rs. 6,95,000 outside India to his son for his study. Now the amount is below the limit so TCS will not be collected from Mr. B.
Situation 2. Now suppose in above example, On 02/03/2021 in Mr. B has to send additional Rs. 10,000 and he approaches to ABC authorized dealer. Now dealer will collect TCS @5% from him on total sum of Rs. 7,05,000 i.e. Rs. 35,250. Means to send money to his son for studying now Mr. B has to pay additional Rs. 35,250.
So, we can understand that the total limit approved under $ 2,50,000 i.e. sum of Rs. 1.75 crore (apprx.) and TCS on that will be Rs. 8,75,000 (if you have pan/aadhaar) or Rs. 17,50,000 (if you don’t have pan or aadhaar). Although credit of the same will be available to individual when they file their Income Tax Return, but additional liability has been brought up by the government for the remitter at the time of remittance. Now many of us have doubt that we will send from different authorized dealer, so here I would like to make it clear that you might be well aware about that Quoting of PAN is mandatory in every small to small transactions in case of banking so, same is the case with transacting with authorized dealer too.
The provision regarding collection is TCS on overseas tour program states that a seller of overseas tour program shall be liable to collect at the rate of 5% /10%(if pan/aadhaar is not available) on any amount from any buyer at the time of receiving the payment for tour package. In simple words, finance budget 2020 bring hike in the price of overseas tour program by 5%/10% as the case may be.
Overseas Tour program mean any tour package which offer visit to a country or countries outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expense of similar nature.
In short, any tour package purchase by any person for any amount for outside India, you have to pay 5%/10% as the case extra which credit will be available to you while filing your Income Tax return.
Let’s take an example to understand in more clear way:
Mr. and Mrs. Mishra went to tour operator and purchases tour package for Singapore for sum of Rs. 2,10,000.
Situation 1. Before budget, they have to pay only Rs. 2,10,000.
Situation 2. Post Budget, they have to pay Rs. 2,10,000 + 5% Tcs i.e. Rs. 10,500 extras to tour operator (Suppose they have pan/aadhaar)
As stated earlier also this provision is applicable irrespective of tour package amount.
A seller those total sales/turnover/gross receipts exceeds Rs. 10 crore during the financial year immediately preceding financial year from the business carried on by it shall be liable to collect TCS at the rate of 0.1 %/1% (non pan/aadhaar cases) on consideration received in excess of Rs. Fifty lakhs.
Let’s take an example to understand in more clear way:
M/s XYZ Ltd. those turnovers for last financial year were 12.5 crore has made sale to M/s ABC ltd. in excess of Rs. 57 lakh and received consideration Rs. 52 lakh. Then in addition to 52 lakh XYZ ltd has to collect TCS of Rs. 200 i.e. 0.1% of 2 lakh ie in excess of 50 lakh. (assuming ABC ltd having PAN)
Further the above stated provisions shall not be applicable in following scenarios: