[Opinion] TCS on Remittances Under LRS and for Purchase of Overseas Tour Package
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- Last Updated on 16 February, 2024
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Manoj Gupta – [2024] 159 taxmann.com 275 (Article)
TCS on foreign remittances was first time introduced by the Finance Act, 2020. Later the Finance Act, 2023 enhanced scope of these provisions and also raised rate of tax collection in certain cases from 1-7-2023. But before the amendment came into effect, on representation from industry the Government decided to provide some relaxations and also to defer the date of implementation to 01.10.2023. For this purpose the Government issued Circular No. 10/2023 amended by the Circular No. 11/2023. Since the substantive law cannot be amended by Circular and hence the Government carried out necessary amendments in sub-section (1G) of section 206C vide Finance Bill, 2024 (As passed by Parliament) retrospectively from 01.07.2023/01.10.2023 as the case may be. This write-up discusses the legal position obtaining as of now post Finance Bill, 2024 (As passed by Parliament).
1. Basic provisions
| Particulars | TCS on remittances under LRS | TCS on purchase of overseas tour package |
| Duty to collect tax | Authorised dealer, who receives an amount for remittance from a buyer, being a person remitting such amount under the Liberalised Remittance Scheme [LRS] of the Reserve Bank of India is liable to collect tax under Section 206C(1G). | Every person being a seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchases such package. |
| Timing of tax collection | Tax is to be collected 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. | Tax is to be collected 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. Even where authorised dealer receives an amount whether or not exceeding Rs.7,00,000 either in aggregate or singly from a buyer towards purchase of an overseas tour program package then he has to collect tax at specified rate where such amount is received under LRS. |
| Person liable to pay tax | Tax is to be collected from any person remitting amount under LRS of RBI. It may be noted that under LRS of RBI it is only resident individuals who can remit money. Even where authorised dealer receives an amount whether or not exceeding Rs.7,00,000 either in aggregate or singly from a buyer towards purchase of an overseas tour programme package then he has to collect tax at specified rate where such amount is received under LRS. | Tax is to be collected from a buyer who purchases the overseas tour programme package. |
2. Rate of tax collection
| Situation | Rate of tax collection(Upto 30.09.2023) | Rate of tax collection (From 01.10.2023) |
| If the amount or aggregate of the amounts being remitted by a buyer under LRS is less than seven lakh rupees in a financial year. | No tax to be collected | No tax to be collected |
| If the amount or aggregate of the amounts being remitted by a buyer under LRS is more than seven lakh rupees in a financial year ( other than cases specified below) | Tax to be collected at 5% on amount in excess of Rs. 7,00,000 | Tax to be collected at 5% on amount in excess of Rs.7,00,000 |
| Amount or aggregate of the amounts in excess of seven lakh rupees remitted by the buyer under LRS in a financial year, if the amount being remitted is a loan obtained from any financial institution as defined in Section 80E, for the purpose of pursuing any education (other than cases covered above). | Tax to be collected at 0.5% on amount in excess of Rs. 7,00,000 | Tax to be collected at 0.5% on amount in excess of Rs.7,00,000 |
| Remittance under LRS other than for the purposes of education or medical treatment | Tax to be collected at 5% on amount in excess of Rs. 7,00,000 | Tax to be collected at 20% on amount in excess of Rs. 7,00,000 |
| Amount received under LRS towards purchase of overseas tour package (Irrespective of amount involved) | Tax to be collected at 5% (No threshold provided) | Tax to be collected at 5% till Rs. 7,00,000 and at 20% thereafter |
| Amount received by seller of an overseas tour package towards purchase of such package (Irrespective of amount involved) | Tax to be collected at 5% ( No threshold provided) | Tax to be collected at 5% upto amount being Rs. 7,00,000 and 20% thereafter. |
Note:
(a) As per section 206CC where the tax collectee fails to provide PAN number to the tax collector then tax shall be collected at twice the rate mentioned above or 5% whichever is higher. The Finance Act, 2023 provided that from 1-7-2023 this rate cannot exceed 20% in any case.
(b) As per section 206CCA where tax is required to be collected at source under the provisions of Chapter XVII-BB, on any sum or amount received by a person from a specified person, the tax shall be collected at the higher of the following two rates, namely:-
(i) at twice the rate specified in the relevant provision of the Act; or
(ii) at the rate of five per cent.
The Finance Act, 2023 provided that from 1-7-2023 this rate cannot exceed 20% in any case.
‘Specified person’ means a person who has not furnished the return of income for the assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be collected, for which the time limit for furnishing the return of income under sub-section (1) of Section 139 has expired and the aggregate of tax deducted at source and tax collected at source in his case is rupees fifty thousand or more in the said previous year.
It is provided that the specified person shall not include
(i) a non-resident who does not have a permanent establishment in India.
(ii) a person who is not required to furnish the return of income for the assessment year relevant to the said previous year and is notified by the Central Government in the Official Gazette in this behalf.
Since the rate of TCS on remittance under LRS and for purchase of overseas tour package has been enhanced to 20% therefore, it has been provided that highest rate of TCS in any case shall not exceed Rs.20%. In the absence of this amendment, rate of TCS in non-PAN cases or non-filer cases would have gone to 40%.
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