Expansion of Section 206C (Tax Collected at Source) of the income tax Act, 1961By Kuldeep Dadhich


Budget 2020 has proposed to insert Sub-Section 1G and 1H to Section 206C to expand the Scope of TCS for following transactions;

A) Foreign remittance through Liberalized Remittance Scheme (LRS)
B) Sale of overseas tour package
C) Sale of goods over a limit.

Liberalized Remittance Scheme (LRS) - Section 206C (1G)

An authorized dealer (AD Bank) receiving an amount or an aggregate of amounts of rupees 0.7 million or more in a financial year for remittance out of India under the LRS of RBI, shall be liable to collect TCS at the rate of (5%) five percent.

In case of absence of PAN and Aadhaar the rate shall be (10%) ten percent.

The above TCS provision shall not apply if the buyer is,-
  • liable to deduct tax at source (TDS) under any other provision of the Act and he has deducted such amount.

  • the buyer is the Central Government, a State Government, 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 notified by the Central Government in the Official Gazette for this purpose subject to such conditions as specified in that notification.

Sale of overseas tour package - section 206C (1G)

A seller of an overseas tour package who receives any amount from any buyer, being a person who purchases such tour package, shall be liable to collect TCS at the rate of 5% five percent.

In case of absence of PAN and Aadhaar the rate shall be (10%) ten percent.
 
The above TCS provision shall not apply if the buyer is,-
  • liable to deduct tax at source (TDS) under any other provision of the Act and he has deducted such amount.

  • the buyer is the Central Government, a State Government, 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 notified by the Central Government in the Official Gazette for this purpose subject to such conditions as specified in that notification.

Sale of goods - section 206C (1H)

A seller of goods is liable to collect TCS at the rate of 0.1 percent on consideration received from a buyer in excess of rupees 5 (five) million, if the seller is a person whose total sales, gross receipts or turnover of previous financial year exceed rupees 100 (Hundred) million.
 
In case of absence of PAN and Aadhaar the rate shall be (1%) one percent.
 
Note: Export sale is also part of this provision unless a clarification received from the Finance Minister.
 
The above TCS provision shall not apply if the buyer is,-
  • liable to deduct tax at source (TDS) under any other provision of the Act and he has deducted such amount.
  • No such TCS is to be collected, if the seller is liable to collect TCS under other provision of section 206C.
  • the buyer is the Central Government, a State Government, 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 notified by the Central Government in the Official Gazette for this purpose subject to such conditions as specified in that notification.
These amendments will take effect from 1st April, 2020

Nature

Who will collect

When will collect

 Limit

Non Applicability

TCS Rate

Foreign Remittance under the LRS

An Authorized Dealer

At the time of receipt of the amount or at the time of debiting the amount payable Whichever is earlier;

Exceeding rupees 0.7 Million in a FY

If the buyer is liable to deduct TDS under any other provisions and has deducted

5%

Overseas tour package

Seller of the package

At the time of receipt of the amount or at the time of debiting the amount payable Whichever is earlier;

Not limit

If the buyer is liable to deduct TDS under any other provisions and has deducted

5%

Sale of goods

Seller of goods whose turnover in the previous Financial Year exceeds rupees ten crores

At the time of receipt of any amount as consideration for the sale of such goods

Exceeding rupees 5 Million  in a FY

If the buyer is liable to deduct TDS under any other provisions and has deducted

0.10%

 

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