As we all are aware that Finance Act, 2020 has come up with new insertion of TCS Provisions of Section 206C(1G)(a) – TCS on foreign remittance through Liberalised Remittance Scheme (LRS), Section 206C(1G)(b) – TCS on selling of overseas tour package and 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)]. But as we observe in the industry there are various doubts which people are facing regarding implementation of these sections hence today, we are coming here with detailed discussion of the same.
Before starting this discussion, the most important point to be noted is that all these amended provisions of TCS will be effective from 1st October, 2020 instead of 1st April, 2020.
Ans: TCS shall be applicable on amount in excess of ₹ 7 lakhs in a financial year and not on the total amount.
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.
Note: Remember, there is no monetary threshold prescribed for remittance for the purchase of overseas tour program package and the bank will collect the TCS on the entire amount irrespective of its value.
Ans: The TCS at 0.5% shall be applicable on the amount exceeding INR 7,00,000 in a financial year under LRS, if the amount remitted is obtained out of a loan from a Financial Institution for pursuing education.
‘Financial Institution’ means a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act); or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf.
For instance, if the total amount remitted under LRS in a financial year is INR 8,00,000 for pursuing overseas education, TCS at 0.5% will be applicable on INR 1,00,000 (INR 8,00,000 – INR 7,00,000).
a) If the education abroad is incurred from own fund or loan has been taken from non-specified or private parties then TCS at 5% will be applicable on remittances exceeding Rs 7 lacs in a financial year.
b) Remember, if the educational program is subsequently decided to cancelled or not persuaded, then the bank will not refund the TCS collected by it. But, the credit for the same can be available to the customer and they can claim refund by filing income tax returns.
Ans: The TCS at 5% will be applicable on the total amount remitted and the bank will collect the TCS on the entire amount irrespective of its value.
For instance, if the amount remitted is INR 2,00,000, the TCS at 5% will be applicable on entire INR 2,00,000.
Note: Remember, if the tour package is subsequently decided to cancelled, then the bank will not refund the TCS collected by it. But, the credit for the same can be available to the customer and they can claim refund by filing income tax returns.
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.
Ans: The above mentioned TCS provisions will not applicable in the following cases:
Ans: Yes, the customer can claim credit for the tax collected by the bank while filing for their tax returns as the TCS is deemed to be a payment of tax on behalf of the person from whom the amount has been collected.
Ans: This section is not applicable on provision of services; hence all service provider should keep in mind that they are not covered under prevue of Section 206C(1H).
Ans: TCS u/s 206C(1H) shall be applicable only on the amount received on or after 1st October, 2020.
E.g. If a seller has received 80 Lakhs before 01st October, 2020 from a particular buyer and receives 10 lakhs after 01st October, 2020. Then in such case the seller would be required to collect tax on Rs. 10 lakhs only and not on Rs. 40 lakhs [i.e. Rs 90 lakhs – Rs 50 lakhs (Threshold)]
Ans: Though the section is effective from 01st October, 2020, the threshold limit of Rs 50 lakhs of sale consideration will be computed from 01 April, 2020. i.e. from beginning of the financial year.
Ans: Yes, GST component should be considered as a part of sale consideration for the purpose of calculation of threshold limit and TCS
Ans: No adjustment on account of sale return or discount or indirect taxes including GST is required to be made for collection of tax under sub-section (1H) of section 206C of the Act since the collection is made with reference to receipt of amount of sale consideration. [Refer – CBDT Circular No. 17/2020 dtd. 29-09-2020]
Ans: Yes, TCS has to be calculated on the amount of receipts since as per the section 206C(1H), the TCS applicable on actual receipt of sale consideration and not on merely raising the invoice of the same.
Ans: Yes, in such situation if the total amount is above threshold limit then the TCS will be applicable in such situation.
E.g. If sale upto 30th September – Rs. 70,00,000,
Sales on 15 October 50,00,000
Amount Received on 25 September – Rs. 1,20,00,000/- (Incl Advance against sales of October month)
The TCS will be applicable in this case on amount of Rs 70,00,000 (Rs. 1,20,00,000 – Rs 50,00,000)
Ans: The due date of payment of TCS is on or before 7th day of the next month in which tax has been collected. TCS return shall be filed in Form 27EQ on a quarterly basis. The due date of filing of quarterly return is within 15 days of the end of the quarter. Further, when the tax collector files his quarterly TCS Returns in Form 27EQ, he has to provide a certificate of TCS in Form 27D to the buyer within 15 days of the date of filing.
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 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 which people are facing in the industry. Hope this will help while implementing the provisions correctly at the time of compliance.
(Article is been Authored Jointly with CA Prapti Raut)