TCS on Foreign Remittance

Finance Act 2020 inserted new sub-section (1G) in Section 206C of the Income-tax Act, 1961 which is effective from 1st October, 2020.

Who shall collect the Tax:

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

When to Collect Tax:

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.

Percentage of TCS:

a) A sum equal to five per cent (5%) to be collected as income-tax. Rate of tax will be 10% if PAN is not available.

b) TCS on amount being remitted out is a loan obtained from any financial institution as defined in section 80E, for the purpose of pursuing any education shall be 0.5%. Rate of tax will be 5% if PAN is not available.

Amount on which tax to be deducted:

Amount on which Tax to be collected shall be more than Rupees Seven Lakh (Rs. 7 Lakh). TCS to collected on amount more than 7 lakhs. For eg. if amount remitted is Rs. 10 Lakhs, TCS shall be collected on Rs. 3 Lakhs only.

Transaction on which provision not applied:

a) Authorised dealer shall not collect the sum on an amount in respect of which the sum has been collected by the seller

b) 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

c) Provisions of this sub-section shall not apply, if the buyer is 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