SECTION 206C(1G) - TCS ON OUTWARD FOREIGN REMITTANCE

SECTION 206C(1G): TCS ON OUTWARD REMITTANCE UNDER LRS

1. What do you mean by TCS?

TCS stands for Tax collected at Source. TCS is a kind of tax that is collected by the seller from the buyer on sale of certain type of goods if the amount exceeds a specified limit, so that it can be deposited to the government.

TCS is required to be collected at the source if the value of transaction exceeds a specified amount.

The purchaser can claim this tax collected by the seller while paying his income tax liability for the year, and if the TCS collected is more than the income tax liability of the assessee then he/ she will be entitled to a refund.

The main purpose of introduction of TCS was to reduce the Tax evasion by the person receiving the income.

Note: -

Seller- A seller who sells specific goods and is responsible for collection of tax from the purchaser.

Purchaser- A purchaser is the person who buys specific goods from seller is responsible for paying TCS amount to seller.

2.  What is TCS under Section 206C(1G) of Income Tax Act?

Section 206C(1G) of Income Tax Act, 1961 mandates the collection of tax at source (TCS) on special remittance under Liberalized Remittance Scheme (LRS).

3. What do you mean by LRS?

The LRS full form is Liberalized Remittance Scheme. It is a foreign exchange policy introduced by RBI, in 2004. It intended to simplify and streamline the process of remitting fund outside India.

LRS scheme is only available to resident Individual.

Under LRS, a resident individual can remit up to USD 2,50,000 per Financial Year for permissible transactions. The LRS limit is for education, medical treatment, employment, emigration, travel, investment etc. However, one cannot use remittances for margin trading, buying lottery ticket etc.

4. When is TCS to be collected under Section 206C(1G)?

TCS requirement arises:

• Debiting the money payable by the buyer to their accounts in books.

            Or

• Upon receipt of such money from the buyer in any mode, whichever is earlier.

Few examples of date of collection are: -

5. Who is required to collect TCS under Section 206C(1G)?

Any authorized dealer is required to collect TCS from the resident person for remittance of foreign currency outside India under LRS if the remittance is above a specific limit as mentioned below.

NOTE: -

The provision of Section 206C(1G) is not applicable to non- resident Individuals.

Example: -

Example 1: - Mr. Devam purchased Singapore tour package from Thomas cook for Rs. 2,50,000 on 16/06/2024?

In this case Thomas cook is required to collect TCS @5% of Rs. 2,50,000 i.e. 12,500.

Example 2: - Suppose in above example Devam deducted TDS of Thomas cook u/s 194C

In this case as the TDS is deducted by Devam so Thomas cook is not liable to conduct TCS u/s 206C(1G).

Example 3: - Mr. SS purchase Thailand tour package from MMT for Rs. 15,00,000 on 10/12/2024?

In this case MMT is required to collect TCS @ 5% of Rs. 7,00,000 i.e. Rs. 35,000 & 20% of Rs. 8,00,000 i.e. Rs. 1,60,000. Total TCS amount is Rs. 1,95,000.

.

6. Rate of TCS under Section 206C(1G)?

The TCS rate under this Section is: -

7. Exemption under Section 206C(1G)?

No TCS if: -

• The foreign remittance if for education and the amount is up to Rs. 7,00,000.
• The foreign remittance is for medical expenses and the amount is up to Rs. 7,00,000.
• The foreign remittance is up to Rs. 7,00,000 for any other purposes.
• TDS is deducted under any other section.
• Buyer is Central government, State government, Embassy, High commission, Consulate and trade representation, Local Authority.
• Buyer is Non-resident visiting in India.

8. Time limit for deposit of TCS under Section 206C(1G)?

The due date for deposit of TCS is as below: -

9. What is the due date for filing of TCS return under Section 206C(1G)?

TCS is to be deposited monthly on the dates mentioned above but the return is to be filed quarterly on or before the below mentioned dates: -

10. Type of TCS return & form to be issued?

TCS under this section has to filed quarterly through FORM 27EQ and the collector has to issue FORM 27D to the buyer within 15 days of filing of return.

11. Fees/ Penalties for Late/ Non- Filing of TCS u/s 206C(1G)?

Following penalties/fees will be levied if there is delay in TCS collection or delay in deposit of TCS or non-filing of quarterly return.

12. FREQUENTLY ASKED QUESTIONS?

Q. What is the threshold limit for TCS under 206C(1G)?

A. The threshold under Section 206C(1G) is Rs. 7,00,000 in aggregate for certain specific transactions.

Q. Is Section 206C(1G) applicable when the payee is a non-resident?

A. NO, this section does not apply when the person is non-resident.

Q. Is TCS applicable on GST amount also?

A. NO, TCS u/s 206C(1G) is not applicable on GST amount, TCS is applicable on net amount excluding GST.

Few Important Points.

1. Payment through overseas credit card not counted in LRS. No TCS applicable on expenditure through international credit card while being overseas till any further order.
2. Threshold or Rs. 7,00,000, for LRS is combined threshold for applicability of TCS on LRS irrespective of the purpose of the remittance.
3. Medical treatment shall include remittance for the purpose of tickets of patients and his attendant, his medical expense and other day to day expenses required for such purposes.
4. Education purpose shall include remittance for purchase of tickets, tuition and other fees to be paid to educational institute and other day to day expenses required to undertake such study.
5. Only overseas flight ticket is booked or only hotel booked not covered under overseas tour program package.