All about TCS applicability on amount received from buyer by a seller for sale of an ‘Overseas Tour Program Package’.

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All about TCS applicability on amount received from buyer by a seller for sale of an ‘Overseas Tour Program Package’.

Finance Act 2020 has inserted a new sub-section (1G) in Tax Collected at Source (TCS) in Section 206C of the Income Tax Act, 1961. This sub section is introduced to collect tax on

  1. Foreign remittance transactions under Liberalized Remittance Scheme [LRS] and
  2. Amount received from buyer by a seller for sale of an ‘Overseas Tour Program Package’.

The section has been made effective from October 1, 2020.

With new provisions, comes the doubts and issues. Let us cover various issues that may arise as a result of the provisions of section 206C(1G).

Let us know about the TCS on amount received from buyer by a seller for sale of an ‘Overseas Tour Program Package’

  1. The ‘Overseas Tour Program Package’ has been explained to mean 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.
  2. The liability to do the TCS shall be of the seller of an overseas tour program package. Seller shall be receiving the amount from the buyer and the amount need to backed by TCS. Buyer is a person who purchases such overseas tour program package. The seller shall collect TCS from buyer at the time of debiting the buyer in his books of accounts or at the time of receipt of amount from buyer, whichever is earlier.
  3. TCS is required at the rate of 5% of the amount receivable from the buyer. However, if the PAN of buyer is not available then the TCS shall be collected @ 10%.
  4. There is no threshold limit as such. Entire amount is liable for TCS even. The seller of overseas tour program package shall collect TCS on any amounts received from buyer even if it is say Rs. 100/-
  5. There are some exceptions when the TCS on overseas tour program package shall not be applicable, as under:
    a) If the buyer is liable to deduct tax TDS under any other provision of this Act and has deducted such amount;
    b) If the buyer is 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 etc.
  6. An important query could be as to whether the limit of ₹ 7 Lacs prescribed for remittance under LRS can be utilized if the same person also purchases the overseas tour program package in the same financial year. It may be noted that if a person makes remittance under LRS and in the same financial year for purchases overseas tour program package then the limit of ₹ 7 lacs shall not be subsumed if foreign currency is purchased for overseas tour program package.
  7. On which amount TCS will be applicable is one of the most common questions by tour operators. Whether TCS IS applicable in case an air travel agent sells only the air ticket and not full package as a deal? It may be noted that the section mandates TCS on sale of overseas tour packages. If it is a sale of only air tickets only then the TCS shall not be applicable if it is not a part of the complete tour package.
  8. New provisions have some intricacies. If the tour package is subsequently cancelled then there is no provision as such to refund the amount of TCS by the seller to the buyer. In such cases, the buyer won’t be having any option but to claim it back in their income tax return by filing their income tax return.
  9. In case of a family tour or group tour, TCS is applicable on the “Buyer” who has purchased the package. If only one person is making the payment then such one person only will be treated as buyer and would be subject to TCS alone. However, if different persons are making payment on their own then the TCS would be collected and paid with individual name only
  10. There is no option like declaration submission for payment without TCS as is available for Form No. 15G/15H. It may be noted that TCS is not at all dependent on the income of the buyer.
  11. If the tour packages includes domestic tour to Indian destinations prior to going overseas then TCS shall be applicable on domestic tour as well as it is the part of International overseas tour package.
  12. Even tours to Bhutan and Nepal will also be subject to TCS as it tours outside Indian Territory.
  13. Concession of 25% in the TCS/TDS rate due to Covid-19 relief measures announced by the government will be applicable in TCS on overseas tour packages as well. Needless to say, this reduction is  made effective from 14-05-2020 up to 31-03-2021 and after 01.04.2021, normal rate would apply. As a result of reduction, the TCS rate till 31/03/2021 shall be 3.75%
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