Govt's push to align TCS with TDS: Insights from Chief Economic Advisor

The government is attempting to link tax collected at source for payments made by individuals with tax deducted from their income sources, a move that will help in ensuring cash flows of the individual taxpayers are not impacted, according to a senior official. The move also comes at a time when the government is set to impose a 20 percent Tax Collection at Source (TCS) on certain international spends from July 1. Generally, TCS is the tax collected by a seller at the time of sale o..

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TCS on Credit Card Payments: Impact on International Transactions and How to Navigate the Changes

With the recent amendments in the Foreign Exchange Management Act (FEMA), international credit card spending now falls under the Reserve Bank of India's (RBI) Liberalised Remittance Scheme (LRS). This change has brought a significant impact on the tax liabilities and expenses of individuals using credit cards for transactions outside India. In this comprehensive guide, we will discuss the implications of these changes, the reasoning behind them, and how you can plan your spending and trips a..

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TCS Exempted for Small Debit and Credit Card Transactions Abroad up to Rs 7 Lakh

Clarification regarding applicability of Tax Collection at Source to small Debit/Credit Transactions under LRS   Concerns have been raised about the applicability of Tax Collection at Source (TCS) to small transactions under the Liberalized Remittance Scheme (LRS) from July 1, 2023. To avoid any procedural ambiguity, it has been decided that any payments by an individual using their international Debit or Credit cards upto Rs 7 lakh per financial year will be excluded from the LRS lim..

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20% TCS on credit card payments made outside India, effective July 1, 2023

This move is expected to help track overseas transactions, but it has also drawn criticism from some who say it will make it more expensive for Indians to travel and shop online and increase the burden of compliance on the existing taxpayer  Here are some of the key points to know about the new TCS on credit card payments The TCS will be applicable on all credit card payments made outside India, regardless of the amount. The TCS will be collected by the credit card issuing bank a..

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FAQs w.r.t. TCS on foreign remittance through Liberalised Remittance Scheme

The e-Gazette notification dated May 16, 2023 omits Rule 7 of the FEM(CAT) Rules, 2000. Here are the Frequently Asked Questions ("FAQs") w.r.t. Tax Collection at Source (TCS) on foreign remittance through the Liberalised Remittance Scheme. Part A. Some clarifications on Tax Collection at Source 1. Why is TCS required to be collected? Ans. Section 206C of the Income-Tax Act 1961 provides for TCS in the business of trading in alcohol, liquor, forest produce, scrap etc. S..

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RBI includes International Credit Card usage in LRS, mandates 20% TCS w.e.f 1st July 2023

Spending in foreign exchange through international credit cards will be covered under the RBI's liberalised remittance scheme (LRS), under which a resident can remit money abroad up to a maximum of $2.50 lakh per annum without the authorisation of the Reserve Bank, as per a Finance Ministry notification. The Ministry on May 16 notified the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023, to include international credit card payments in the LRS...

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Higher TCS on Foreign Remittances: What Parents Need to Know While Sending Money for Education Expenses

The Union Budget 2023 proposed to increase the tax collection at source (TCS) for foreign remittances under the liberalised remittance scheme (LRS) from 5% to 20%. This means that parents may have to pay more money for their children studying abroad. The increased TCS will apply to foreign trips, investing overseas, sending money abroad, and other remittances except for education and medical purposes. However, expenses that parents incur for maintaining their children who live overseas may no..

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TDS And TCS under Income Tax

TDS and TCS are the government's most important sources of revenue. It's also critical for businesses to pay their taxes on time to avoid penalties and remain compliant. With effect from 01/07/2021, Finance Act of 2021 inserted section 194Q to provide a deduction of tax on certain purchases. Section 194Q of the Income tax Act states that any person("buyer") purchases goods exceeding 50 lakhs rupees from a resident seller in any previous year. At the time of making the paymen..

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Higher Rate of TDS and TCS under Section 206AB and 206CCA

Finance Act, 2021 inserted two sections 206AB - tax deduction and 206CCA - tax collection which came into effect from 1 July, 2021. These sections were amended through the Finance Act, 2022. What does Section 206AB and 206CCA say? Section 206AB and 206CCA mandate tax deduction and tax collection, respectively, at a higher rate in case of Specified Persons.   Who are Specified Persons? Specified persons are those persons who satisfies both the conditions stated below: He..

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Central Government withdraws 5% TCS on tour package of NRIs visiting India

Central Government relaxes provisions of TCS under section 206C(1G) of the Income-tax Act, 1961 in respect of non-resident individuals visiting India Section 206C (1G) of the Income-tax Act, 1961 ("the Act") provides for collection of tax by a seller of an overseas tour programme package from a buyer, being a person purchasing such package, at the rate of 5% of the amount of the package. Representations were received from domestic tour operators who were facing difficulties in co..

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Guidelines on TDS/TCS u/s 194O, 194Q & 206C

The Central Board of Direct Taxes (CBDT) has issued the further Guidelines for Section 194-O, Section 194Q, and Section 206C (1-I) of Income Tax Act, 1961 vide a Circular No. 20/2021 dated 25th November 2021 for removing certain difficulties. The Finance Act, 2020 and the Finance Act, 2021 have inserted sections 194-O, 194Q, and 206C(1H) to the Income-tax Act for mandating deduction and collection of tax at source on certain transactions. The guideline on TDS/TCS under Section 194O, section 194Q..

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Section 206AB and 206CCA - Special Provision for Deduction/Collection of TDS/TCS for non-filers of ITR

Special provision for deduction of tax at source for non-filers of income-tax return 206AB. (1) Notwithstanding anything contained in any other provisions of this Act, where tax is required to be deducted at source under the provisions of Chapter XVIIB, other than section 192, 192A, 194B, 194BB, 194LBC or 194N on any sum or income or amount paid, or payable or credited, by a person (hereafter referred to as deductee) to a specified person, the tax shall be deducted at the higher of the follow..

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TDS and TCS on Purchase of Goods Under Income Tax

With the effect of 1. 07.2021 Finance Act, 2021 had inserted section 194Q in Income Tax Act, 1961 to provide a deduction of tax on certain purchases. Section 194Q of the Income-tax Act states that any person who buys goods of an amount exceeding 50 lakhs rupees from a resident seller in any previous year shall at the time of making the payment or at the time of making such credit to the account of the seller, whichever is earlier deduct an amount of 0.1% of such amount exceeding 50 lak..

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Section 194Q and 206C(1H) - Lets resolve the confusion

The basic difference between TDS and TCS is that TDS is deducted by the buyer and TCS is collected by the seller. Learning this with a basic example, suppose you entered into a transaction and bought some goods on which TDS is applicable. It will be your responsibility to deduct the TDS before paying the seller the consideration for the goods/services. Similarly, suppose you enter into a transaction on which TCS is applicable. The seller supplies the goods/ service. While making a payment to ..

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Compliance Check Functionality for Section 206AB & 206CCA

TDS / TCS - Compliance Functionality for Section 206AB & 206CCA for Non-filers using Online Utility   A new tax rule relating to the TDS and TCS has come into force from 01.07.2021 under which the the taxpayers who has not filed their Income Tax Returns for the past two Financial Years shall have to pay higher tax. It is important to note here that the Income Tax Department had introduced two new sections namely Section 206AB and Section 206CCA with a purpose of deducting TDS at..

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TCS Rate Chart for FY 2021-22

TCS Rates for Financial Year 2021-22(A.Y.2022-23)   TCS RATES Section Nature of Payment Threshold Limit of Payment Rates 206C (1) Sale of Scrap   1.00% 206C (1) Sale of Tendu Leaves   5.00% 206C (1) Sale of Timber obtained unde..

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TCS On sale of Goods - New Income Tax Compliance w.e.f 1st October 2020

With a view to widen the tax-net, the Indian government has extended the scope of Tax Collected at Source ('TCS'). The Government of India has added a new sub section (1H) in the section 206C which would be called as section i.e. 206C (1H) of the Income Tax Act, 1961 with regards to 'Tax Collection at Source'. What is Section 206C (1H)? 'Every person, being a seller, who receives any amount as consideration for sale of any goods of the value or aggregate of such value e..

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Treatment of GST for TDS/TCS on purchase/sale of goods

Arjuna (Fictional Character): Krishna, Section 194Q for TDS deduction on the purchase of goods has become effective from 1.7.2021, whereas TCS collection on sale of goods is already applicable from last year from 1.10.2020, but there is confusion regarding the treatment of GST amount while applying the provisions of these sections. Krishna (Fictional Character): Arjuna, the taxpayer has to consider his method of accounting for the purpose of treatment of GST amount. Also, CBDT has issued circ..

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Which Section 194Q or 206C(1H) will be applicable?

1. What is Section 194Q and 206C(1H)? Section 194Q is for Tax deducted at source (TDS) applicable from 01.07.2021 and Section 206C(1H) is for Tax Collected at source(TCS) applicable from 01.10.2020.   2. When is a person liable to deduct TDS u/s 194Q and TCS u/s 206C(1H)? TDS is to be deducted under Section 194Q when the following conditions are satisfied- The person (who is a buyer) has turnover/gross receipts/Sales from business of above Rs.10 crore during th..

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New TDS sections inserted by Union Finance Bill 2021 and audit implications

Introduction The Finance Bill 2021 has introduced following new sections in relation to Tax Deducted at source (TDS) and Tax Collected at source (TCS): Section 194Q- TDS on purchase of goods Section 206AB: Higher rate of TDS for non filers of Income tax return Section 206CCA: Higher rate of TCS for non filers of Income tax return Section 194 P: TDS in case of specified senior citizen Out of the above 4 newly introduced sections, section 194Q, 206AB and 206CCA will have major ..

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