Check out the TCS Rate Chart for FY 2021-22 (AY 2022-23) here.
Budget 2020 proposed new provision for TCS on Sale of Overseas Tour Package. In this piece I have tried to cover the topic at length in Question & Answer format, so let's begin,
Q1. What is TCS?
Ans: TCS is an abbreviation for Tax Collected at Source. Provisions of TCS are governed by Section 206C of the Income Tax Act, 1961. TCS is one of the modes of collecting Income Tax from the Taxpayer, it is just like the concept of GST where Seller will collect Tax from the Buyer and will pay the same to the Government.
Q2. Who is required to Collect Tax on Sale of Overseas Tour Package?
Ans: New sub-section (1G) to Section 206C has been introduced in the Budget 2020 which provides for TCS on sale of Overseas Tour Programme Package. As per this provision, every Seller of an Overseas Tour Programme Package is required to Collect Tax from the Buyer of such Overseas Tour Programme Package. This sub-section is applicable from 01st October, 2020.
Q3. What is an Overseas Tour Programme Package?
Ans: As per Explanation provided for this sub-section, Overseas Tour Programme Package means, any tour package which offers visit to a Country or Countries or Territory or Territories outside India. It includes expenses such as,
- Expenses incurred on travel
- Expenses incurred for stay
- Expenses incurred for boarding or lodging
- Any expenditure of similar nature or in relation thereto
Hence it can be stated that scope of 'Overseas Tour Programme Package' is very wide as it not only covers stay or boarding or lodging but travel and any other expense in relation thereto, also there is no classification for the purpose of travel, i.e. TCS provisions will be applicable in all the cases whether it is for business purpose or leisure purpose or for any other purpose.
Q4. Are all the Seller (including an Individual or HUF) of Overseas Tour Programme Package liable to Collect TCS?
Ans: Yes, all the Sellers (including an Individual or HUF) irrespective of their Turnover in the Previous Year are liable to collect TCS. Hence all those Sellers of Overseas Tour Programme Package who are liable to collect the Tax must apply for Tax Deduction and Collection Account Number (TAN).
Q5. How and When Tax has to be collected?
Ans: If the Buyer of the Overseas Tour Programme Package quotes Permanent Account Number (PAN) or Aadhar Card Number, TCS will be made @5%, or else @10%. Seller is required to collect the Tax at the time of Debiting the amount payable by the buyer or at the time receipt of the amount from the buyer, whichever is earlier. Please Note that if the Buyer is a Non-Resident who does not have Permanent Establishment in India, TCS will be made @5% only. Mode of payment has no relevance as far as TCS provisions are concerned, i.e. it doesn't matter whether Buyer pays for Tour by Cash or by Cheque or by any other mode.
Q6. TCS to be Collected at which Value?
Ans: TCS has to Collected at the amount payable by the buyer, i.e. Total amount of Package including taxes thereon.
Q7. How TCS Credit can be availed by the buyer?
Ans: Amount of TCS collected by the Seller will get reflected in the FORM 26AS of the Buyer on successful Filing of TCS Return by the Seller. Such amount of TCS will be available as set off against the Net Income Tax payable by the Buyer for the respective Financial Year. If, there is No Tax Payable during the year or amount of TCS made is higher than Total Income Tax Payable, then buyer can claim refund of such Tax Collected at Source on filing of his Income Tax Return.
Q8. How to ensure that Seller has filed TCS Return?
Ans: Within 15 Days of Due Date of furnishing of TCS Return, Seller has to issue a Certificate (FORM 27D) to the buyer. This certificate will serve as proof of Filing of Return by the Seller.
Q9. Are there any exceptions for this provision?
Ans: Yes, there are two exceptions provided in the provision where TCS will not be collected, First, TCS shall not be collected by the Seller if the Buyer is liable to deduct Tax at source under any other provision of the act and has deducted such amount. Second, TCS shall not be collected by the Seller if the Buyer is,
- Central Government
- State Government
- High Commission
- Legation, Commission, Consulate
- Trade Representation of a Foreign State
- Local Authority
It must be noted in the first case that, the Buyer must have actually deducted the tax as per relevant provisions. For example, if buyer is liable to deduct tax of the Seller of Overseas Tour Package under Section 194C and the Buyer has duly deducted the tax, then seller is not liable to collect Tax under this provision.
Q10. What is the due date of Payment of Tax to the Central Government?
Ans: Seller is required to pay the Tax Collected during the month using Challan No./ITNS 281 on or before Seven Days (7 Days) from the end of the month in which collection is made. For instance, Tax Collected in the month of April has to be deposited to the Central Government on or before 7th of May.
Q11. What is the penalty for not collecting the tax or not paying the tax within due date?
Ans: If the Seller does not collect the tax or after collecting the tax fails to pay within the prescribed time limit, he shall be liable to pay simple interest at the rate of one percent (1%) per month or part thereof on the amount of such tax from the date on which such tax was collectible to the date on which such tax was actually paid. If the Seller fails to pay to the credit of Central Government, the Tax Collected by him, he shall be punishable with rigorous imprisonment for a term which shall be not less than three months but which may extend to Seven Years and with fine. Q
12. What are the compliance requirements in respect of Filing of Return for TCS?
Ans: FORM No. 27EQ is the Quarterly Statement which is required to be filed by the Seller. Due Date of Filing of FORM No. 27EQ is as follows,
Quarter of the Financial Year ended
15th July of the Financial Year
15th October of the Financial Year
15th January of the Financial Year
15th May of the Financial Year immediately following the Financial Year in which collection is made
Q13. What is the Penalty for Non-Filing of FORM No. 27EQ?
Ans: Where a person fails to file FORM No. 27EQ on or before the due date as stated above, then he shall be liable to pay, by way of fee, a sum of Rs.200 for every day during which the failure continues. The amount of late fees will be limited to the amount of TCS. Minimum penalty can be levied of Rs. 10,000 which can go up to Rs. 1,00,000, if Returns are Not Filed in time.
There is one aspect which may need further clarification by the Income Tax Department, it is that the Buyer is not specifically defined under the law, how to identify the buyer if Person who pays for the tour and the person who actually goes on the tour are different. Considering how difficult and complicated this compliance is, Indian Association of Tour Operators (IATO) has approached Ministry of Finance seeking a complete roll back of this provision. In my view the basic purpose of this section is to keep a track on the persons travelling abroad and expenditure incurred by them on Overseas Tours, however, this objective may also have been achieved by asking tour operators to file an Annual Information Return, which may capture Permanent Account Number (PAN) / Aadhar Card Number along with the expenditure incurred on the Overseas Tour Package.
I hope you find above information useful, please feel free to correct me if anything I mentioned above you found to be incorrect.