TCS on foreign remittance and selling of overseas tour package

Section 206C of the income tax Act has been amended by Finance Act 2020. Section 206C deals with TCS. A new Sub Section 1G of Section 206C has been inserted which discuss about TCS on foreign remittance through Liberalised Remittance Scheme (LRS) and on selling of overseas tour package.

Summary of Section 206C

• Every person, –
  • being an authorised dealer, who receives an amount, or an aggregate of amounts, of Rs. 7,00,000/- or more in a financial year for remittance out of India from a buyer, being a person remitting such amount out of India under the Liberalised Remittance Scheme of the RBI;
  • 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 5% of such amount as TCS.

• Collector: Following person are required to collect TCS under this section:
  • Authorised Dealer being authorised by RBI
  • Seller of an overseas tour program package
• Buyer: Any person
• Threshold Limit:
  • If authorised dealer receive an amount or aggregate of amounts of Rs.7,00,000/- or more in a financial year.
  • If seller of an overseas tour program package receives any amount.
• Rate of TCS: TCS shall be collected at @ 5%
• Time of collection:Collector is required to collect TCS within earlier of the following dates:

• • At the time of debiting of such amount to the account of the buyer or
  • At the time of receipt thereof in cash or by the issue of a cheque or draft or by any other mode

• No TCS collected by the authorised dealer or seller if:
  • buyer liable to deduct TDS under any other provision of this Act and has deducted TDS on such amount.
  • the buyer is:
    • Central Government,
    • State Government,
    • An embassy,
    • High Commission,
    • legation,
    • Commission,
    • Consulate,
    • The trade representation of a foreign State,
    • 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.

Provision Extract from Section 206C of the Income Tax Act

In section 206C of the Income-tax Act, ––

1. after sub-section (1F), the following sub-sections shall be inserted, namely: ––

      ‘(1G) Every person, ––

• • being an authorised dealer, who receives an amount, or an aggregate of amounts, of seven lakh rupees or more in a financial year 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;
  • 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 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 and has deducted such amount;
  • 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, ––

• • “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 to deal in foreign exchange or foreign security;
  • “overseas tour program 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.