Budget 2020 - TCS Provisions

The provisions of ‘Tax Collection at Source’ i.e. TCS are covered under Section 206C of the Income Tax Act. The Finance Bill 2020 has proposed insertion of two new Sub-section namely (1G) and (1H) to Section 206C. With the said insertion of two new sub-Sections, the scope of the ‘Tax Collection at Source’ has been widened. The following transactions are proposed to be covered under TCS:

Transactions covered under Liberalised Remittance Scheme i.e. LRS of Reserve Bank of India i.e. RBI [Section 206C (1G)(a)]; and
Overseas tour program package [Section 206C (1G)(b)]; and
TCS on sale of goods [Section 206C (1H)].

This article explains the newly inserted provisions of Section 206C. It also provides TCS chart as applicable for the Financial Year 2021.

TCS on Transactions covered under LRS of RBI [Section 206C (1G)(a)]

It should be noted that the Liberalised Remittance Scheme permits the resident individual to send a certain amount of money to another country for investment or expenditure purpose. Vide the Finance Bill 2020 TCS provisions are made applicable to said transactions which are covered under LRS.

Applicability

The said provisions are applicable to an authorized dealer who is receiving an amount or aggregate of an amount of INR 7 Lakhs or more during a financial year, from a single buyer, for remitting same outside India under LRS would be liable to deduct TCS. The dealer is required to collect the TCS within earlier of the following:

At the time of receipt of an amount; or
At the time of debiting the amount receivables.

Rate of TCS

The rate of TCS is 5% in case the PAN/Aadhaar number of the buyer is available. However, the rate of TCS will be 10% in case the PAN/Aadhaar number of the buyer is not available.

TCS on Overseas Tour Program Package [Section 206C (1G)(b)]

Applicability

The seller of an overseas tour programme package receiving an amount from the buyer for purchasing the overseas tour package shall be liable to collect TCS.

Rate of TCS

The rate of TCS is 5% in case the PAN/Aadhaar number of the buyer is available. However, the rate of TCS will be 10% in case the PAN/

Aadhaar number of the buyer is not available.

TCS on Sale of Goods [Section 206C (1H)]

The provisions of Section 206C (1H) get applicable in case the following conditions are satisfied:

The total turnover/sales/gross receipts of the seller of any goods exceeds INR 10 Crore during the immediately preceding previous year; and
Such seller receives amount (as consideration) for sale of any goods of the value exceeding INR 50 Lakhs in any previous year.

Rate of TCS

The rate of TCS is 0.1% in case the PAN/Aadhaar number of the buyer is available. However, the rate of TCS will be 1% in case the PAN/Aadhaar number of the buyer is not available.

Other Important Points

The TCS under provisions of Section 206C (1H) is to be collected at the time of receipt of an amount from the buyer of the goods.
TCS is not to be collected under Section 206C (1H) under the following circumstances:
- When the seller is liable to collect TCS under any other provisions; or
- When the buyer is liable to deduct TDS under any provisions of the Act.

TCS charts as applicable for Financial Year 2020-2021 (Assessment Year 2021-2022)

Tabulating hereunder the TCS rates as applicable for the Financial Year 2020-2021:

Relevant sub-Section of 206C	Particulars	TCS rates
(1)	Alcoholic liquor for human consumption	1%
Tendu leaves	5%
Timber: · Obtained under a forest lease · Obtained under any other mode	2.5% 2.5%
Any other forest produce (other than tendu leaves and timber)	2.5%
Scrap	1%
Minerals (either coal or lignite or iron ore)	1%
(1C)	Grant of license or lease of: · Toll Plaza · Parking lot · Mining and quarrying other than mining and quarrying of petroleum, mineral oil and natural gas	2% 2% 2%
(1F)	Sale of the motor vehicle of the value exceeding INR 10 Lakhs	1%
(1G)	(a) TCS on foreign remittance through LRS of RBI. (b) TCS on an overseas tour package.	5% (or 10%) 5% (or 10%)
(1H)	TCS on sale of goods	0.1% (or 1%)

Back to Learn

Frequently Asked Questions

Common questions about Tax Collection at Source: TCS Provisions in Budget 2020.

Tax Collection at Source (TCS) is a mechanism under the Income Tax Act where the seller of certain goods or services is required to collect tax from the buyer at the prescribed rates. The collected amount is then deposited with the government as tax.

The Finance Bill 2020 has introduced two new sub-sections, 206C(1G) and 206C(1H), under Section 206C of the Income Tax Act. These provisions have widened the scope of TCS to include transactions under the Liberalized Remittance Scheme (LRS) of RBI, overseas tour program packages, and sale of goods exceeding certain thresholds.

An authorized dealer receiving an amount or aggregate of Rs. 7 lakh or more in a financial year from a single buyer for remitting the same outside India under the LRS would be liable to deduct TCS. TCS should be collected at the time of receipt or debiting the amount receivable, whichever is earlier.

The TCS rate for transactions under LRS is 5% if the buyer's PAN/Aadhaar is available. If the buyer's PAN/Aadhaar is not available, the TCS rate is 10%.

The seller of an overseas tour program package receiving an amount from the buyer for purchasing the package shall be liable to collect TCS.

The TCS rate for overseas tour program packages is 5% if the buyer's PAN/Aadhaar is available. If the buyer's PAN/Aadhaar is not available, the TCS rate is 10%.

TCS on the sale of goods is applicable if the total turnover/sales/gross receipts of the seller exceed Rs. 10 crore in the preceding financial year, and the seller receives an amount exceeding Rs. 50 lakh for the sale of goods in any previous year.

The TCS rate for the sale of goods is 0.1% if the buyer's PAN/Aadhaar is available. If the buyer's PAN/Aadhaar is not available, the TCS rate is 1%.

TCS on the sale of goods should be collected at the time of receipt of the amount from the buyer of the goods.

Yes, TCS under Section 206C(1H) is not applicable if the seller is liable to collect TCS under any other provision or if the buyer is liable to deduct TDS under any provision of the Income Tax Act.