TCS on Overseas Remittance & Sale of Overseas Tour Package

Widening the scope of section 206C to include TCS on foreign remittance through Liberalised Remittance Scheme (LRS) and on selling of overseas tour package as well as TCS on sale of goods over a limit.

Section 206C of the Income Tax Act provides for the collection of tax at source (TCS) on business of trading in alcohol, liquor, forest produce, scrap etc. Sub-section (1) of the said section, provides that every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of certain goods a sum equal to specified percentage, of such amount as income-tax.

In order to widen and deepen the tax net, the finance bill 2020 has proposed an amendment to section 206C to levy 5% TCS on overseas remittance and for sale of overseas tour package

1. TCS on overseas remittance

The government in the budget proposed to impose a tax on remittances after a sample survey by the income tax department showed that many those sending out money had not filed tax returns. Of the 5,026 selected cases of foreign remittance, data showed that 1,807 did not file returns. Last year, US14 billion was sent out using the liberalised remittance scheme. This figure was less than US1 billion in 2009- 2010.

According to the budget provision, any authorised dealer* receiving an amount or an aggregate of amounts of 7,00,000 or more in a financial year for remittance out of India under the liberalised remittance scheme is required to deduct 5% TCS. In cases where such remittances not supported by PAN or Aadhaar the TCS rate would be 10%.

Under the liberalised remittance scheme, individuals are allowed to send out $250,000 in a year.

The following are the purposes permitted under LRS.

Current account transactions

1. Private visits to any country (except Nepal and Bhutan)
2. Gift or donation
3. Going abroad for employment
4. Emigration
5. Maintenance of close relatives abroad
6. Travel for business, or attending a conference or specialised training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment/ check-up Expenses in connection with medical treatment abroad Studies abroad
7. Any other current account transaction which is not covered under the definition of current account in FEMA 1999.

Capital account transactions

1. opening of foreign currency account abroad with a bank.
2. purchase of property abroad.
3. making investments abroad- acquisition and holding shares of both listed and unlisted overseas company or debt instruments; 5acquisition of qualification shares of an overseas company for holding the post of Director; acquisition of shares of a foreign company towards professional services rendered or in lieu of Director’s remuneration; investment in units of Mutual Funds, Venture Capital Funds, unrated debt securities, promissory notes;
4. setting up Wholly Owned Subsidiaries and Joint Ventures (with effect from August 05, 2013) outside India for bonafide business subject to the terms & conditions stipulated in Notification No FEMA.263/ RB-2013 dated March 5, 2013.
5. extending loans including loans in Indian Rupees to Non-resident Indians (NRIs) who are relatives.

*“authorised dealer” is proposed to be defined to mean a person authorised by the Reserve Bank of India under sub-section (1) of section 10 of Foreign Exchange Management Act, 1999 to deal in foreign exchange or foreign security.

2. TCS on overseas tour package

A seller of an #overseas tour program package who receives any amount from any buyer, being a person who purchases such package, shall be liable to collect TCS at the rate of 5%. In non-PAN/ Aadhaar cases the rate shall be 10%.

#Overseas tour program package is proposed to be defined to mean 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 expense of similar nature or in relation thereto.