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What is Section 206CQ?

Neethi V. Kannanth , Last updated: 24 June 2024  
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Most of them have come across Tax Collected At Source under Section 206CQ of part B of Form 26AS. But how many of you are aware of what exactly is Section 206CQ?

Let me get straight to the point- There is no section called 206CQ in the Income Tax Act,1961. However, the description about Section 206CQ in Form 26AS states that it deals with collection of Tax at source for remittances made under the Liberalised Remittance Scheme. 206CQ is nothing but a TCS deposit challan code. The actual section which deals with Tax Collected at Source on Foreign Remittances is Section 206C(1G).

Points To Rember

Applicability of TCS It applies to all LRS transactions and purposes.
Rate of TCS
  • 5% of the amount if exceeding ₹7 lakh for non-tour package purposes.
  • 0.5% of the amount if exceeding ₹7 lakh for education loans 
  • 10% if no PAN is provided for non-tour purposes.
  • 1% if no PAN is provided for education loans.
Tax Credit for TCS TCS can be claimed as a credit against tax payable while filing ITR.
Exceptions for TCS Collection
  • No TCS if the buyer deducts TDS under any other provision.
  • No TCS for transactions involving the Central Government, State Governments, embassies, consulates, and other specified entities.

What is Section 206C(1G)?

Section 206C(1G) states that every person-

  1. Being an authorised dealer, who receives the 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.
  2. 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 as specified as income-tax.

What is Section 206CQ

Is there any exemption limit for Collection of Tax At Source under section 206C(1G)?

The proviso to section 206C(1G) states that no TCS shall be collected 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 program package.

What is the Rate of TCS?

Every dealer shall collect a sum of 5 percent of the amount or aggregate of the amount 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 program package.

However, in cases where the amount is remitted for the purpose of pursuing education through a loan obtained from any specified financial institution in India (covered under sec.80E of Income-tax Act, 1961), the rate of TCS shall be 0.5 percent on the amount of remittance exceeding INR 7 lakhs.

Further, if the remitter does not furnish PAN tax shall be collected at the rate of 10 percent in case where the amount being remitted is for a purpose other than purchase of overseas tour program package and 1 percent  in cases where the amount is remitted for the purpose of pursuing education through a loan

Click here to know about TCS Rate chart

Can Tax credit be claimed for TCS?

TCS can be adjusted against tax payable while individuals are filing their income tax return.

 

Applicability of TCS?

As the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India is applicable only to Residents, TCS shall also be applicable only to residents.

TCS is applicable on all LRS transactions & for all purposes of remittance, reported under LRS.

Further, TCS is applicable at PAN level. The LRS limit maintenance, TCS charging and TCS reporting is consolidated at customer level i.e at PAN level.

 

Are there any exceptions from whom TCS will not be collected?

The seller of overseas tour program package shall not collect TCS in the following scenarios:

  • If the buyer is liable to deduct tax TDS under any other provision of this Act and has deducted such amount;
  • 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 etc.
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