TCS on overseas Tour Package & Foreign Remittance in Income Tax

By | April 22, 2020
(Last Updated On: April 22, 2020)

TCS on overseas Tour Package & Foreign Remittance under Income

TCS on overseas Tour Package & Foreign Remittance in Income Tax  is imposed by Section 206C(1G) of Income Tax by Finance Act 2020 w.e.f 01.10.2020

Commentary on TCS on overseas Tour Package & Foreign Remittance under Income

  • What is section in Income Tax for TCS on overseas Tour Package & Foreign Remittance ? Section 206C(1G) of Income Tax inserted by Finance Act 2020
  • What is Applicability date of TCS on overseas Tour Package & Foreign Remittance under Income ? TCS on overseas Tour Package & Foreign Remittance under Income is applicable  from the 1st day of October, 2020,
  • Who is liable to Collect TCS on overseas Tour Package & Foreign Remittance ? 
    • TCS shall be collected on Foreign Remittance by an authorised dealer, who receives an amount, for remittance out of India from a buyer, being a person remitting such amount out of India under the Liberalised Remittance Scheme of the Reserve Bank of India;
      • “authorised dealermeans a person authorised by the Reserve Bank of India under sub-section (1) of section 10 of the Foreign Exchange Management Act, 1999 to deal in foreign exchange or foreign security;
    • TCS shall be collected on overseas tour programme package by a seller of an overseas tour programme package, who receives any amount from a buyer, being the person who purchases such package,
      • overseas tour program package” means 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 expenditure of similar nature or in relation thereto.
      • [Note : Tour Pacakage has not been defined in Income tax but The term tour operator has been defined under GST in notification No. 11/2017-Central Tax (Rate) dated 28.6.2017 of the Central Good & Services Tax Act to mean any person engaged in the business of planning, scheduling, organizing, arranging tours (which may include arrangements for accommodation, sightseeing or other similar services) by any mode of transport and includes any person engaged in the business of operating tours]
      • [Note : The term “Tour” has been defined under Notification No. 37/97-S.T., dated 22/08/1997 issued under the Finance Act 1994 (Service Tax law) as a journey from one place to
        another irrespective of the distance between such places]
      • The term Package has not been defined in law. The Collins Dictionary of Law defines “package holiday” as a holiday arranged by a travel company in which your travel and
        accommodation are booked for you. Thus whether there is booking of travel or accommodation or both , TCS may apply.
      • It is doubtful whether TCS provisions will apply if the amount is collected from buyer being Non Resident.
  • When TCS should be Collected on overseas Tour Package & Foreign Remittance ?  : TCS shall be collected , earlier of following :-
    • 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,
  • What is Rate of TCS on overseas Tour Package & Foreign Remittance ?
    • TCS has to be collected from the buyer, a sum equal to 5% of such amount as income-tax:
    • In nonPAN/Aadhaar cases the rate shall be 10%.
    • The authorised dealer shall collect a sum equal to one half per cent. of the amount or aggregate of the amounts in excess of seven lakh rupees remitted by the buyer in a financial year, if the amount being remitted out is a loan obtained from any financial institution as defined in section 80E, for the purpose of pursuing any education:
  • What is the amount on which TCS on Foreign Remittance shall be collected ?
    • Authorised dealer shall collect TCS from the buyer  equal to 5% of the amount or aggregate of the amounts in excess of Rs 7 lakh remitted by the buyer in a financial year, where the amount being remitted is for a purpose other than purchase of overseas tour programme package:
    • The authorised dealer shall collect a sum equal to one half per cent. of the amount or aggregate of the amounts in excess of seven lakh rupees remitted by the buyer in a financial year, if the amount being remitted out is a loan obtained from any financial institution as defined in section 80E, for the purpose of pursuing any education:
  • When No TCS will apply on Foreign Remittance ? 
    • Authorised dealer shall not collect the sum, if the amount or aggregate of the amounts being remitted by a buyer is less than Rs 7 lakh in a financial year and is for a purpose other than purchase of overseas tour programme package:
    • Authorised dealer shall not collect the sum on an amount in respect of which the sum has been collected by the seller:(i.e if seller has collected TCS, then Authorised dealer shall not collect TCS)
    • No TCS shall be collected if the buyer is liable to deduct tax at source under any other provision of this Act and has deducted such amount;
    • No TCS shall be collected if the buyer is the Central Government, a State Government, an embassy, a High Commission, a legation, a commission, a consulate, the trade representation of a foreign State, a local authority as defined in the Explanation to clause (20) of section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein
  • Whether TCS credit can be claimed by buyer when he files his Income tax Return ? Yes , it is tax collected at source, which can be adjusted by the buyer when he files his Income tax Return.

Video Explanation as per Fiance Bill 2020 by CA Satbir singh

Section 206C(1G) of Income Tax

In section 206C of the Income-tax Act with effect from the 1st day of October, 2020,—

(I) after sub-section (1F), the following sub-sections shall be inserted, namely:

‘(1G) Every person,––

(a) being an authorised dealer, who receives an amount, for remittance out of India from a buyer, being a person remitting such amount out of India under the Liberalised Remittance Scheme of the Reserve Bank of India;

(b) being a seller of an overseas tour programme package, who receives any amount from a buyer, being the person who purchases such package

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 five per cent. of such amount as income-tax:

Provided that the authorised dealer shall not collect the sum, if the amount or aggregate of the amounts being remitted by a buyer is less than seven lakh rupees in a financial year and is for a purpose other than purchase of overseas tour programme package:

Provided further that the sum to be collected by an authorised dealer from the buyer shall be equal to five per cent. of the amount or aggregate of the amounts in excess of seven lakh rupees remitted by the buyer in a financial year, where the amount being remitted is for a purpose other than purchase of overseas tour programme package:

Provided also that the authorised dealer shall collect a sum equal to one half per cent. of the amount or aggregate of the amounts in excess of seven lakh rupees remitted by the buyer in a financial year, if the amount being remitted out is a loan obtained from any financial institution as defined in section 80E, for the purpose of pursuing any education:

Provided also that the authorised dealer shall not collect the sum on an amount in respect of which the sum has been collected by the seller: Provided also that the provisions of this sub-section shall not apply, if the buyer is,––

(i) liable to deduct tax at source under any other provision of this Act and has deducted such amount;

(ii) the Central Government, a State Government, an embassy, a High Commission, a legation, a commission, a consulate, the trade representation of a foreign State, a local authority as defined in the Explanation to clause (20) of section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein

Explanation.––For the purposes of this sub-section,––

(i) “authorised dealer” means a person authorised by the Reserve Bank of India under sub-section (1) of section 10 of the Foreign Exchange Management Act, 1999 to deal in foreign exchange or foreign security;

(ii) “overseas tour program package” means 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 expenditure of similar nature or in relation thereto.

Memorandum of Finance Bill 2020 Explaining TCS on overseas Tour Package & Foreign Remittance under Income

Section 206C of the Act provides for the collection of tax at source (TCS) on business of trading in alcohol, liquor, forest produce, scrap etc.

206C(1), 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.

In order to widen and deepen the tax net, it is proposed to amend section 206C to levy TCS on  overseas remittance

Overseas Remittance

An authorised dealer receiving an amount or an aggregate of amounts of Rs 7 Lakh or more in a financial year for remittance out of India under the LRS of RBI, shall be liable to collect TCS, if he receives sum in excess of said amount from a buyer being a person remitting such amount out of India, at the rate of 5% .

In nonPAN/Aadhaar cases the rate shall be 10%.

Meaning of Authorized Dealer

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

When TCS Will not Apply

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 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

Effective Date for TCS on foreign remittance

These amendments will take effect from 1st April, 2020. (this was proposed in finance Bill 2020, but by Finance Act 2020 it has been made effective from 01.10.2020)

New TCS under Income Tax on sale of overseas tour package

In order to widen and deepen the tax net, it is proposed to amend section 206C to levy TCS for sale of overseas tour package, as under.

Sale of 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%

Meaning of Overseas tour program package

“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

When TCS Will not Apply

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 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

Finance Bill 2020  : Amendment of section 206C.

. In section 206C of the Income-tax Act,–– (I) after sub-section (1F), the following sub-sections shall be inserted, namely:––

‘ (1G) Every person,––
(a) being an authorised dealer, who receives an amount, or an aggregate of amounts, of seven lakh rupees or more in a financial year for remittance out of India from a buyer, being a person remitting such amount out of India under the Liberalised Remittance Scheme of the Reserve Bank of India;

(b) being a seller of an overseas tour program package, who receives any amount from a buyer, being the person who purchases such package,

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 five per cent. of such amount as income-tax:

Provided that the provisions of this sub-section shall not apply, if the buyer is,––

(i) liable to deduct tax at source under any other provision of this Act and has deducted such amount;

(ii) the Central Government, a State Government, an embassy, a High Commission, a legation, a commission, a consulate, the trade representation of a foreign State, a local authority as defined in the Explanation to clause (20) of section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.

Explanation.––For the purposes of this sub-section,––

(i) “authorised dealer” means a person authorised by the Reserve Bank of India under sub-section (1) of section 10 of the Foreign Exchange Management Act, 1999 to deal in foreign exchange or foreign security;

(ii) “overseas tour program package” means 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 expenditure of similar nature or in relation thereto.

TCS on Tour Package & Foreign Remittance

For Latest Notifications on Income Tax check Govt website Click here 

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