Broadened TCS provisions In India

 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.

  1. 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:

  1. 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.
  2. 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.

Author: Ruchika Gupta, Manager-Direct Tax, AKGVG & Associates.

This content is meant for information only and should not be considered as an advice or legal  opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

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