Know Applicable New IT Provisions of TCS from 1st October 2020
Tax Collected at Source Under Income Tax – New Provisions
Applicable from 01 October 2020
TCS commonly known as Tax collection at
source covered by Section 206(C) of Income Tax Act’1961. 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.
Changes in TCS provisions in Finance Act, 2020 Vs proposals in Finance Bill, 2020
The Finance Act, 2020 as notified on 24.03.2020 has amended certain proposed provisions of the Finance Bill, 2020 related to Tax Collected at Source or TCS.
A snapshot of changes in TCS
provisions introduced by the Finance Act, 2020 are listed below-
1. The new proposed changes in TCS provisions shall come into effect from 1st October 2020, instead of earlier 1st April 2020.
2. According to the amendments, it is provided for tax collection at source (TCS) on remittance under Liberalised Remittance Scheme (LRS) of Reserve Bank of India exceeding Rs. 7 Lakh in a year and the rate of TCS is 5 per cent.
It is now expressly provided that no TCS shall be required on Rs. 7 Lakh.
3. In case the remittance is for a loan obtained from any financial institution as defined in section 80E shall be 0.5 per cent.
4. TCS shall also apply on sale of the overseas tour package without any threshold limit and the rate of TCS is five per cent.
5. The Finance Bill, 2020 (as passed by the Lok Sabha) has amended sub-section (1H) to provide that no tax shall be collected in respect of export or import of goods.
Section 206C of the Act provides for the collection of tax at source (TCS) on the business of trading in alcohol, liquor, forest produce, scrap, etc.
Sub-section (1) of the said section, inter-alia, 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.
|
Section |
Nature
of Transaction Goods
and/or Services liable to TCS |
Rate
of TCS |
Status |
|
|
If
PAN or Aadhaar is furnished |
If
PAN or Aadhaar is NOT furnished |
|||
|
206C(1) |
Alcoholic Liquor for human
consumption |
1% |
5% |
Existing
Provision |
|
Tendu leaves |
5% |
10% |
Existing
Provision |
|
|
Timber obtained under a forest lease |
2.5% |
5% |
Existing
Provision |
|
|
Timber obtained by any mode other
than under a forest lease |
2.5% |
5% |
Existing
Provision |
|
|
Any other forest produce not being
timber or tendu leaves |
2.5% |
5% |
Existing
Provision |
|
|
Scrap "scrap" means waste and
scrap from the manufacture or mechanical working of materials which is
definitely not usable as such because of breakage, cutting up, wear and other
reasons |
1% |
5% |
Existing
Provision |
|
|
Minerals, being coal or lignite or
iron ore |
1% |
5% |
Existing
Provision |
|
|
206C(1C) |
Where
the Nature of contract or licence or lease, etc. |
|||
|
Parking lot |
2% |
5% |
Existing
Provision |
|
|
Toll plaza |
2% |
5% |
Existing
Provision |
|
|
Mining and quarrying shall not include mining and
quarrying of mineral oil and “mineral oil” includes petroleum and natural gas |
2% |
5% |
Existing
Provision |
|
|
206C(1F) |
Sale of a motor vehicle of the value
exceeding Rs. 10 Lakh |
1% |
5% |
Existing
Provision |
|
206C(1G) (w.e.f. 01-10-2020) |
Remittance under Liberalised
Remittance Scheme of Reserve Bank of India exceeding Rs. 7 Lakh |
New
Provision |
||
|
(a) If the remittance is a loan
obtained from any financial institution as defined in section 80E, for the
purpose of pursuing any education |
0.5% |
5% |
New
Provision (Amended
by Finance Act, 2020) |
|
|
(b) Others |
5% |
10% |
New
Provision |
|
|
Sale of the Overseas Tour Package |
5% |
10% |
New
Provision |
|
|
206C(1H) (w.e.f. 01-10-2020) |
Sale of goods in excess of Rs. 50
Lakh in a year by a seller whose turnover is more than Rs. 10 Crore |
0.1% |
1% |
New
Provision |
As per section 206CC, if the buyer does
not furnish his PAN (or Aadhaar No.) to the seller, then the rate of TCS shall
be higher of-
(a) twice the prescribed rate, or
(b) 5 per cent
except for TCS on Sale of goods in
excess of Rs. 50 Lakh in a year by a seller whose turnover is more than Rs. 10
Crore for which 5 per cent is substituted with 1 per cent.
Widening the scope of TCS: Finance Bill, 2020 proposed to provide for tax collection at source (TCS) to widen and deepen the scope of existing provisions of TCS. New TCS provisions introduced from FY 2020-21-
1. On remittance under Liberalised Remittance Scheme of Reserve Bank of India exceeding seven lakh rupees in a year, and
2. On sale of the overseas tour package.
3. On the sale of goods in excess of Rs. 50 lakh in a year by a seller whose turnover is more than Rs. 10 crore.
The Union Budget 2020 has proposed certain amendments in the existing TCS provisions, widened the scope of existing TCS provisions and introduced new TCS provisions vide Finance Bill, 2020. The changes in the proposed provisions related to TCS for AY 2021-22 (FY 2020-21) and the provisions finally enacted as law by Finance Act, 2020 are listed below-
Sub-Section (1G) to section 206C has two clauses. One clause is
related to remittance of amount out of India under the Liberalised Remittance
Scheme (LRS) of the Reserve Bank of India RBI) and the other clause is related
to payments made for overseas tour programme package.
TCS On foreign remittance of Through LRS if amount or aggregate of total
amount exceeds Rs. 7 lakh
First understand what is LRS ? The Liberalised Remittance Scheme (LRS)
of the Reserve Bank of India (RBI) allows resident individuals to remit
a certain amount of money during a financial year to another country for
investment and expenditure. 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 an resident individual can sent a sum of
$2,50,000 outside India to meet any expenditure like for study in abroad or to
make investment in foreign country.
There were no TCS earlier, but now if a resident individual have to send
money through authorized dealer in excess of 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/aadhaar.
Let’s take examples to understand in
more clear way :-
Situation 1. On 21/12/2020 Mr. B (Having a Pan)
approaches to ABC authorized dealer and Mr. B has to send a sum of Rs. 6,95,000
outside India to his son for his study. Now the amount is below the limit so
TCS will not be collected from Mr. B.
Situation 2. Now suppose in above example, On
02/03/2021 in Mr. B has to send additional Rs. 10,000 and he approaches to ABC
authorized dealer. Now dealer will collect TCS @5% from him on total sum of Rs.
7,05,000 i.e. Rs. 35,250. Means to send money to his son for studying now Mr. B
has to pay additional Rs. 35,250.
So, we can understand that the total limit approved under $ 2,50,000
i.e. sum of Rs. 1.75 crore (apprx.) and TCS on that will be Rs. 8,75,000 (if
you have pan/aadhaar) or Rs. 17,50,000 (if you don’t have pan or
aadhaar). Although credit of the same will be available to individual
when they file their Income Tax Return, but additional liability has been
brought up by the government for the remitter at the time of remittance.
Now many of us have doubt that we will send from different authorized dealer,
so here I would like to make it clear that you might be well aware about that
Quoting of PAN is mandatory in every small to small transactions in case of
banking so, same is the case with transacting with authorized dealer too.
TCS on Overseas tour program
The provision regarding 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 tour package. In simple
words, finance budget 2020 bring hike in the price of overseas tour program by
5%/10% as the case may be.
Overseas Tour program mean
any tour package which offer 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.
Let’s take an example to
understand in more clear way:
Mr. and Mrs. Mishra went to tour operator and purchases tour
package for Singapore for sum of Rs. 2,10,000.
Situation 1. Before budget, they have to pay only Rs. 2,10,000.
Situation 2. Post Budget, they have to pay Rs. 2,10,000 + 5% Tcs
i.e. Rs. 10,500 extras to tour operator (Suppose they have pan/aadhaar)
As stated earlier also this provision is applicable irrespective of
tour package amount.
TCS on sale of Goods above Specified Limit
A seller those total sales/turnover/gross receipts exceeds Rs. 10
crore 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.
Let’s take an example to
understand in more clear way:
M/s XYZ Ltd. those turnovers for last financial year were 12.5 crore
has made sale to M/s ABC ltd. in excess of Rs. 57 lakh and received
consideration Rs. 52 lakh. Then in addition to 52 lakh XYZ ltd has to collect
TCS of Rs. 200 i.e. 0.1% of 2 lakh ie in excess of 50 lakh. (assuming ABC ltd
having PAN)
Further the above stated
provisions shall not be applicable in 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 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
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