A new sub section 1G is introduced in section 206C to apply Tax Collection at Source (TCS) on sale of overseas tour package. TCS requires that the seller of tour package will collect tax from the buyer over and above the cost of his tour package and will deposit it in the Government Treasury on monthly basis. Seller would then be required to file quarterly TCS return separately. Buyer can get the credit of TCS in their income tax return.
Newly inserted section 1G to section 206C reads as under:
206 (1G)
Every person,––
(a) being an authorised dealer, who receives an amount, or an aggregate of amounts, of seven lakh rupees or more in a financial year 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;
(b) 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 equal to five per cent. of such amount as income-tax: Provided that the provisions of this sub-section shall not apply, if the buyer is,
(i) liable to deduct tax at source under any other provision of this Act and has deducted such amount;
(ii) 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 as defined in the Explanation to clause (20) of section 10 or any other person as the Central Government may, by notification in the Official Gazette, specify for this purpose, subject to such conditions as may be specified therein.
Explanation.––For the purposes of this sub-section,
(i) “authorised dealer” means a person authorised by the Reserve Bank of India under sub-section (1) of section 10 of the Foreign Exchange Management Act, 1999 to deal in foreign exchange or foreign security; 40 42 of 1999.
(ii) “overseas tour program package” means any tour package which offers visit to a country or countries or territory or territories outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto.
Here are some of the common Frequently asked question on the applicability of TCS on this issue.
Question:
Whether any threshold limit is there for TCS?
Answer:
There is no threshold limit. Even a sale of Rs. 100/- will attract TCS.
Question:
Whether Compnay, firm, AOP, Individual/ HUF who have newly started the business will also be required to do TCS or they would be required to do TCS only on their crossing the turnover limit of Rs. 1 Cr?
Answer:
A seller being an Firm, company, AOP etc who has newly started the business will be required to do TCS from the day one. However, Individual/HUF would be required to comply with the new TCS provision if their turnover in the preceding year is more than Rs. 1 Cr.
Question:
Whether the overseas package will include the travel by road also like travel package for Bhutan and Nepal?
Answer:
Yes, any tour outside Indian Territory would be subject to TCS
Question:
From TCS will be required if the buyer is a corporate who is selling it as a free to their customers on achieving their target?
Answer:
In such case, the person travelling would be someone else but the buyer would be different. TCS is applicable on the “buyer” & no traveler. TCS is required to be done on sale to a “Buyer”. In case the package is sold to a corporate for incentivizing their dealer or customers, the TCS would be required to be done from the corporate. However, the same need clarifications from CBDT for the reason that the purpose is get the name of the person who is travelling as well. As of now, the interpretation of the provision conveys that the TCS will be required from the buyer who may not be the traveler.
Question:
Whether the TCS will be applicable if air travel agent simply sells the air ticket and not complete package?
Answer:
No. Simple sale of air tickets would not attracts TCS unless and otherwise it’s a complete package itself.
Question:
If the person has bought overseas a tour package now but will be travelling after 01.04.2020. Whether TCS will be applicable?
Answer:
No. All purchase and payment done prior to 1st April 2020 will be outside the TCS applicability.
Question:
What if the tour package is subsequently cancelled?
Answer:
There is no provision as such to refund the amount of TCS to the buyer by the booking agent. The buyer would be required to claim it back in their income tax return at the time of filing their income tax return.
Question:
If there are 4 person in the family who are travelling. Whether TCS would be required to be done from all 4 persons or simply from one person who is making the payment?
Answer:
TCS is applicable on the “Buyer”. Whosoever purchases it will be subject to TCS. If only one persons makes the payment, he may be treated as “one” buyer and would be subject to TCS alone. However, if the 4 persons want to do their payment separately or want their tour package bill separately, TCS could be done from all 4 persons.
Question:
What if the buyer doesn’t have taxable income and he want to furnish 15G/15H or a declaration that he don’t have any income.
Answer:
There is no exception from TCS and it is not dependant on the income of the buyer. TCS would be applicable on all such cases. There is no declaration form like Form No. 15G/15H in such cases.
Question:
What if the buyer is a 16 years minor (like in case of overseas tour package arranged by school in direct arrangement with tour operator)?
Answer:
TCS would be required and the PAN of the parents will be required in view of the earlier CBDT circular.
Question:
What is a student is going for education abroad?
Answer:
If the student is buying a Tour package then the TCS would be applicable. Buyer of simply air tickets is not subject to TCS.
Question:
What if the tour package includes domestic tour to Indian destinations before going overseas? Like person in Indore given a tour package to Bangkok wherein tour package will include the tour from Indore to Kolkata and then to Bangkok.
Answer:
Since the domestic tour is the part of International overseas tour package, entire amount would be subject to TCS..
Question:
What if Honeymoon tour package of a couple is sponsored by the Parents of the couple?
Question:
The buyer of tour package in such case is the parents and not couple. TCS will be required to be done from the person to whom the billing is done who need not be a traveler. The present interpretation of section 206C(1G) requires the TCS from buyer who is the person to whom the billing is done and from whom the payment is collected.
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