Change in the TCS provisions in 2020 Finance Bill

In this post, we will look into the new changes in the TCS section as proposed in the Finance Bill of 2020.

We will cover the following topics in this post:

• New TCS provisions
• Foreign Remittance through Liberalised Remittance Scheme
• Sale of Overseas Tour Packages
• TCS on receiving an amount for the sale of any goods

Amendments were made in Tax collection at Source (TCS) provisions by the Finance Bill 2020 to widen the tax base by including remittance under liberalised remittance scheme, sale of overseas tour packages, and sale of goods.

The change came into effect from 1st October 2020. As per the changes, TCS is to be collected at the time of receipt or debiting the amount whichever is earlier.

New TCS provisions

I. Foreign Remittance through Liberalised Remittance Scheme (LRS)

An individual resident can send money to another country for investment/expenditure under the Liberalised Remittance Scheme (LRS). The authorised dealer who receives an amount/aggregate of an amount over 7 lakhs in an FY, from a single buyer for remitting outside India under LRS is liable to collect TCS.

The table below gives information related to the TCS on Foreign Remittance through the Liberalised Remittance Scheme (LRS) and Education Loan obtained under Section 80E.

This can be explained as below;

• An individual sends an amount through an authorised bank to another person who is staying in the USA under LRS. This amount is sent for medical treatment and is remitted during FY 2020-21, where 5% TCS is applicable on the excess amount above the existing threshold limit.
• When an individual sends an amount through authorised bank to his child studying in London under LRS, after taken an education loan from a financial institution in FY 2020-21 and repaying it to an authorised Dealer, 0.5% TCS is applicable to the excess amount above the existing threshold limit.

Note:

• TCS is applicable only if the amount exceeds the threshold limit.
• Authorised Dealer is a person authorised by the RBI under the Foreign Exchange Management Act, 1999 to deal with foreign exchange or foreign security.

II. Sale of Overseas Tour Packages

A new change under Section 206C(1G)(b) if a seller of an overseas tour package receiving any amount from buyers who purchased the package is liable to collect TCS from the buyer and pay it to the department. There is no threshold limit mentioned by the department.

The table gives information regarding TCS on Sale of Overseas Tour Package

III. TCS on receiving an amount for the sale of any goods

If a seller’s total sales, gross receipts or turnover exceed Rs. 10 Crores during the FY 2019-20 & onwards, and if the seller receiving an amount as consideration for the sale of any goods of the value or aggregate of such value exceeding 50 lakh rupees during the FY 2020-21 & onwards to collect tax from the buyer.

Sale of consideration includes advance received for sale.

Note: No TCS is collected for the following situations:

• If the seller is liable to collect TCS under other provisions of section 206C [Section 206C (1), 206C (1F), and 206C (1G)].
• If the buyer is liable to deduct TDS under any provision of the Act and has deducted such amount.

TCS is not collected from the Central Government, State Government, embassy, High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in Explanation to clause (20) of Section 10, or any other person as the Central Government specifies in the Official Gazette notification (subject to conditions as prescribed in such notification).

The table gives information on TCS on Sale of Any Goods.

With that, we have come to the end of this blog on new changes in TCS as per the Finance Bill 2020. Share your queries with us in the comment section below.