TCS Provision Under Income Tax Applicable From 1st April, 2020.

Tax Collected at Source (TCS) is a tax that is payable by the seller but which is collected from the buyer. Section 206C of the Income Tax Act has an exhaustive list of goods that are specified for this purpose.

What is Tax Collected at Source (TCS)?

TCS is a short form for Tax Collected at Source. This tax is payable by the seller who collects in turn from the lessee or buyer. The goods are as specified under section 206C of the Income Tax Act, 1961.

TCS Rates in India:

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 have 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:

• On foreign remittance through LRS of RBI (Liberalised Remittance Scheme)
• On selling of overseas tour package
• TCS on sale of goods over a limit where TDS has been not been deducted by a buyer under any other provision of the Income Tax Act.

TCS On foreign remittance of Through LRS if amount or aggregate of total amount exceeds Rs. 7 lakh

What is LRS? 

The Liberalized Remittance Scheme (LRS) is a facility provided by the RBI for all resident individuals including minors to freely remit up to a certain amount in terms of US Dollar for current and capital account purposes or a combination of both.

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 a resident individual can send a sum of $2,50,000 outside India to meet any expenditure like for study abroad or to make an investment in a foreign country.

There were no TCS earlier, but now if a resident individual has to send money through an authorized dealer in excess of the 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/aadhar.

TCS on Overseas tour program

The provision regarding the 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 a tour package. In simple words, the finance budget 2020 bring a hike in the price of overseas tour program by 5%/10% as the case may be.

Overseas Tour program means any tour package which offers a 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.

TCS on sale of Goods above Specified Limit

A seller those total sales/turnover/gross receipts exceeds Rs. 10 crores 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.

Further, the above-stated provisions shall not be applicable in the following scenarios:

• If the buyer is liable to deduct TDS or collect TCS under any other provision of the Act and has deducted/collected such amount
• If the buyer is the CG, SG, an embassy, a High Commission, legation, consulate, the trade representation of the foreign state, local authority
• Or any class of person notified by the central government in the official gazette for the purpose subject to such condition as specified in that notification.