The Finance Act, 2020 has introduced several modifications in the Indian taxation thereby enlarging the scope of applicability of TCS provisions. AKGVG & Associates has summarized the amendments brought about in TCS provisions by the Finance Act, 2020 for ease of understanding.
- On sale of goods
W.e.f. 1st October 2020, all sellers (with sales exceeding Rs. 10 crores during the FY 2019-20) need to collect TCS @ 0.1% (0.075% for FY 2020-21 & 1% for non-PAN buyers) of the sales consideration (against sale of goods) received in excess of Rs. 50 lacs from a buyer during the financial year.
Exceptions to the above provisions:
- Goods exported out of India
- Goods imported into India
- TDS already applicable and deducted by buyer on such purchase
- TCS already applicable under any other provisions
- Sale of services
- Where the turnover of the seller was less than Rs. 10 crores during FY 2019-20
- Where the sales consideration receivable from the buyer during the current financial year is less than Rs. 50 lacs
- Any consideration received before 1st October 2020.
- On foreign remittances under LRS
W.e.f. 1st October 2020, the following TCS provisions have been introduced on foreign remittances on which TDS has not been deducted:
- In case of Liberalized Remittance Scheme (LRS), the authorized dealerswill be required to collect TCS @5% (10% for non-PAN) on remittances made outside India.Where the remittance is towards an education loan remitted outside India (covered under 80E), then TCS will be collected @0.5% of the amount remitted.
- A seller of an overseas tour program package needs to collect TCS @5% (10% for non-PAN) on remittances made outside India towards purchase of such package.
Exceptions to the provisions as stated in point a) above:
- Payments (except for overseas tour package) upto 7 lacs in a year
- Payments (except for overseas tour package) upto 7 lacs where amount exceeds 7 lacs in a year
- TCS already collected on the transaction under any other provision
In this regard, the Central Board of Direct Taxes (‘CBDT’) issued Notification No. 54/2020 dated 24.07.2020, there by amending Rule 31AA, Rule 37BC, Rule 37CA, Rule 37-I of the Income Tax Rules, 1962 and Form No. 27EQ to incorporate the changes in relation to the aforementioned provision.
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