Taxation (TCS/TDS) and regulations for working as collection agent for a foreign entity

We are entering into a legal contract with a foreign entity to be their collection agent for their online services,subscripttions and products sold in india. basically the amount for products sold will be credited to our indian bank account and we will swift them money on daily basis after deducting our commission.
1. As we are entering into contract as a company (not individual) will TCS 5% be applicable to be deducted on our swift/wire transaction to foreign entity as it is a trade (current account) transaction? or will banks deduct 5% TCS? or;
2. Will 7 lakh limit under LRS be applicable to individual buyers who are transferring money to our indian bank account?

so basically only question is applicability of LRS and TCS on our swift/wire transaction

thanks.

Your query relates to TCS under the Liberalised Remittance Scheme (LRS) and how it applies (or doesn't) to Indian companies acting as collection agents for foreign entities.

Let’s break this down for clarity:

✅ Your Business Setup (Key Facts)

You're an Indian company, not an individual.
You act as a collection agent for a foreign entity.
Indian customers pay your Indian bank account.
You deduct commission and remit the balance (via SWIFT) to the foreign entity.

🔍 TCS & LRS Applicability

1. Does 5% TCS under Section 206C(1G) apply on your SWIFT remittance to the foreign principal?

No, because:

Section 206C(1G) (TCS on foreign remittance) applies only to individuals remitting money abroad under the Liberalised Remittance Scheme (LRS) of RBI.
Since you are a company making trade (current account) remittances, LRS is not applicable.
Therefore, TCS under 206C(1G) is not applicable on your SWIFT transfers.

Also, as per RBI guidelines, LRS is not available to corporates, partnership firms, HUFs, trusts, etc. It’s meant for resident individuals only.

✅ Conclusion:

No TCS will be collected by your bank on your outward SWIFT remittances, because this is a current account transaction, not an LRS transaction.

2. Does ₹7 lakh limit under LRS apply to Indian customers paying your Indian bank account?

Again, No, because:

LRS and the ₹7 lakh limit apply when individuals remit money abroad (e.g., for foreign travel, tuition, investments).
In your case, Indian customers are making payments to an Indian company, so there is no foreign remittance happening by them.
Hence, no LRS / TCS applies to your customers' payments either.

💡 Summary

Point	Applicability
TCS under Section 206C(1G) on your SWIFT transfer	❌ Not Applicable (Not under LRS, you are a company)
₹7 lakh LRS limit for your Indian customers	❌ Not Applicable (They are not remitting funds abroad)
TDS obligations	✅ You must deduct TDS under Section 195, if applicable, on commission paid to the foreign entity (see note below)

⚠️ Additional Note: TDS on Payment to Foreign Entity

You must consider TDS under Section 195 on the amount remitted to the foreign entity (excluding your commission).
If the foreign entity is providing services that are taxable in India, TDS may apply unless:
- You obtain a lower/nil TDS certificate, or
- You determine (based on DTAA) that no tax is required to be deducted.
A proper CA certificate (Form 15CB) and Form 15CA may be required for each outward remittance.