TCS on Foreign Remittances & Foreign Tours

Budget 2020(For F.Y 2020-2021)

The Budget 2020 has imposed a 5% Tax Collection at Source (TCS)from 1.04.2020 on: –

1. Foreign Remittances more than Rs. 7 lakhs in a Financial Year under the Liberalized Remittance Scheme (LRS) &
2. Payment to Tour Operators for Foreign Travel.

1. Foreign Remittances

The Finance Bill, 2020 has widened the scope of Tax Collection at Source(TCS) by inserting a new Sub-Section (1G) in section 206C whereby, every person, being an Authorized Dealer(AD), who receives an amount of Rs.7 lakhs or more in a Financial Year for remittance out of India from a buyer, being a person remitting such amount out of India under Liberalized Remittance Scheme(LRS) of the RBI, 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% (If PAN/Aadhar is not Provided than 10%) of such amount as income-tax.

Credit of Tax Collected at Source on foreign remittances will be available while Filing Income Tax Returns. TCS is not an additional or new tax, TCS is like Tax Deducted Source (TDS).

LRS Scheme is not for Non-Residents, so the above TCS provision is not applicable on Non – Residents. Non Resident can remit Money from their NRO Account to abroad without Tax being Collected at Source. 

2. Payment to Tour Operators for Foreign Travel

The Finance Bill, 2020 under the above new sub-section (1G) of section 206C has also proposed for Collection of Tax at Source by the Seller of Overseas Tour Program Package at the Rate of 5%(If PAN/Aadhar is not Provided than 10%) at the time of debiting the amount for the purchase of the overseas tour program package or at the time of receipt of such amount, whichever is earlier.

Credit of Tax Collected at Source on Purchase of Foreign Tour Packages will be available while Filing Income Tax Returns. TCS is not an additional or new tax, TCS is like Tax Deducted Source (TDS).

The above TCS provision shall not apply if the buyer is:-

1. Liable to deduct tax at source under any other provision of the Act and he has deducted such amount.
2. The Central Government, a State Government, an embassy, a High commission, legation, commission, consulate, the trade representation of a foreign State, a local authority (Panchayat, Municipality, Municipal Committee and District Board, Cantonment Board) 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.