Tax Deduction/Collection at Source
Extension of date of filing of TDS/TCS return
CA. Manoj Gupta
The due date for filing of TDS returns in Form No. 26Q and
27Q for first quarter of 2023-24 is 31st July, 2023 and for TCS returns in Form
No. 27EQ for the first quarter of 2023-24 is 15th July, 2023.
This date has been extended to 30th September, 2023 by CBDT
via Circular No. 09/2023, dt. 28-6-2023.
However, no such extension has been granted in respect of
TDS returns in Form No. 24Q (Dealing with salary payments)
Accordingly, TDS certificates in Form No. 16A for first
quarter of 2023-24 shall be issued by 15th October, 2023. Similarly, TCS
certificates in Form No. 27D for first quarter of 2023-24 shall also be issued
by 15th October, 2023.
6. TCS on foreign remittances
Through the Finance Act 2023, amendments were carried out
in sub-section (1G) of section 206C of the Act.
These amendments, inter alia, increased the
rate of TCS from 5% to 20% for remittance under LRS as well as for purchase of
overseas tour program package and removed the threshold of Rs. 7 lakh for
triggering TCS on LRS. These two changes were not applicable when the
remittance is for education or medical purpose. These amendments were to take
effect from 1st July 2023.
The Government had notified Foreign Exchange Management
(Current Account Transactions) (Amendment) Rules, 2023 vide an e-gazette
notification dated 16th May 2023 to remove the differential treatment for
credit cards vis-a-vis other modes of drawal of foreign exchange under LRS.
discussions with various
stakeholders, and taking into account comments and suggestions received, the
following decisions have been taken and the CBDT via press release dated
28-6-2023 provided as under:
(i) To give adequate time to
Banks and Card networks to put in place requisite IT based solutions, the
Government has decided to postpone the implementation of its 16th May 2023
e-gazette notification. This would mean that transactions through
International Credit Cards while being overseas would not be counted as LRS and
hence would not be subject to TCS. The Press Release dated
19th May 2023 stands superseded.
(ii) Threshold of Rs. 7 Lakh per
financial year per individual in clause (i) of sub-section (1G) of section 206C
shall be restored for TCS on all categories of LRS
payments, through all modes of payment, regardless of the purpose:
Thus, for first Rs. 7 Lakh remittance under LRS there shall be no TCS. Beyond
this Rs. 7 Lakh threshold, TCS shall be:
(a) 0.5% (if remittance for
education is financed by education loan);
(b) 5% (in case of remittance
for education/medical treatment);
(c) 20% for others.
For purchase of overseas tour
program package under Clause (ii) of Sub-section (1G), the TCS shall continue
to apply at the rate of 5% for the first Rs. 7 lakhs per individual per annum;
the 20% rate will only apply for expenditure above this limit.
(iii) Increased TCS rates to apply from
1st October, 2023: The increase in TCS rates; which were to come into
effect from 1st July, 2023 shall now come into effect from
1st October, 2023 with the modification as in (ii) above.
Till 30th September, 2023, earlier rates (prior to amendment by the
Finance Act 2023) shall continue to apply.
The necessary changes to the Rules (Foreign Exchange
Management (Current Account Transactions Rules), 2000) are being issued
separately.
Later, CBDT vide Circular No. 10/2023, dt. 30-6-2023 as
amended by Circular No. 11/2023, dt. 06-7-2023 clarified as under:
(a) Finance Act, 2023 has
amended sub-section (1G) of section 206C of the Income-tax Act, 1961
(hereinafter referred to as the Act') to, inter alia, --
(i) increase the rate of Tax
Collection at Source (TCS) from 5% to 20% for remittance under LRS as well as
for purchase of overseas tour program package; and
(ii) remove the threshold of Rs.
7 lakh for triggering TCS on LRS.
These two changes did not apply
when the remittance is for education and medical purpose.
(b) Subsequently, the Government
had notified Foreign Exchange Management (Current Account Transactions)
(Amendment) Rules, 2023 vide an e-gazette notification dated 16th May, 2023 to
remove the differential treatment for credit cards vis i vis other modes of
drawal of foreign exchange under LRS. This change has now been postponed for
the time being.
(c) Comments were received about
the practical difficulties that may arise from the removal of the threshold for
LRS payments other than for education and medical treatment. During meetings
with the RBI, Banks and Card networks, some financial institutions have desired
more time to modify their current IT systems to address issues arising from the
implementation of the provision of TCS on credit card transactions.
(d) In order to address these
issues, a Press Release dated 28.6.2023 was issued by Ministry of Finance
wherein the following decisions relating to income-tax have been taken:
(i) Threshold of Rs. 7 lakh per
financial year per individual in clause (a) of sub-section (1G) of section 206C
shall be restored for TCS on all categories of LRS. payments. Through all modes
of payment. Regardless of the purpose. Thus, for first Rs. 7 lakh remittance
under LRS there shall be no TCS. Beyond this Rs. 7 lakh threshold, TCS shall be
at the rate of -
(a) 0.5% (if remittance for
education is financed by loan taken from a financial institution);
(b) 5% (in case of remittance
for education/medical treatment);
(c) 20% for others.
For purchase of overseas tour
program package under clause (b) of sub-section (1G) of section 206C, the TCS
shall continue to apply at the rate of 5% for the first Rs. 7 lakh per
individual per annum1, the 20% rate will only apply for expenditure above this
limit.
(ii) Increased TCS rates to
apply from 1st October, 2023: The increase in TCS rates; which were to come
into effect from 1st July, 2023 shall now come into effect from 1st October,
2023 with the modification as in (i) above. Till 30th September, 2023, earlier
rates (prior to amendment by the Finance Act, 2023) shall continue to apply.
(e) Earlier and new TCS rates
are summarised as under:
Nature of payment
|
Earlier rate before
Finance Act, 2023
|
New rate w.e.f. 1st October, 2023
|
(1)
|
(2)
|
(3)
|
LRS for
education, financed by loan from financial institution
|
Nil upto
Rs. 7 lakh
0.5% above
Rs. 7 lakh
|
Nil upto
Rs. 7 lakh
0.5% above
Rs. 7 lakh
|
LRS for
Medical treatment/education (other than financed by loan)
|
Nil upto
Rs. 7 lakh
5% above
Rs. 7 lakh
|
Nil upto
Rs. 7 lakh
5% above
Rs. 7 lakh
|
LRS for
other purposes
|
Nil upto
Rs. 7 lakh
5% above
Rs. 7 lakh
|
Nil upto
Rs. 7 lakh
5% above
Rs. 7 lakh
|
Purchase of
Overseas tour program package
|
5% (without
threshold)
|
Nil upto
Rs. 7 lakh
20%
thereafter
|
*Note: (i) TCS rate mentioned in column 2 shall continue to apply till
30st September, 2023.
(ii) There shall be no TCS on expenditure under LRS under
clause (i) of subsection (1G) of section 206C upto Rs. 7 lakh, irrespective of
purpose.
Note: For giving statutory
recognition to above proposal amendments to Income Tax Act, 1961 need be
carried out.
7. Use of international credit cards
In the Foreign Exchange Management (Current Account
Transactions) Rules, 2000 after rule 6, the following rule was inserted and
shall be deemed to have been inserted with effect from the 16th day of May,
2023 namely : -
'7. Use of International
Credit Card while outside India.--Nothing contained
in rule 5 shall apply to the use of International Credit Card for making
payment by a person towards meeting expenses while such person is on a visit
outside India.'.
Therefore, as of now International Credit Card spends by a
person towards meeting expenses while such person is on a visit outside India
will not be covered by LRS and thus no tax will be collectible on such spends.
8. Guidelines in the matter of TCS on foreign
remittances
CBDT vide Circular No. 10/2023, dt. 30-6-2023 has issued
Guidelines for the purposes of section 206C(1G). These guidelines are as under:
Question 1: Whether payment
through overseas credit card would be counted in LRS?
Answer: As announced in the
press release dated 28th June, 2023, the classification of use of international
credit card while being overseas, as LRS is postpo4ed. Therefore, no TCS shall
be applicable on expenditure through international credit card while being
overseas till further order.
Question 2: Whether the
threshold of Rs. 7 lakh, for TCS to become applicable on LRS, applies
separately for various purposes like education, health treatment and others?
For example, if remittance of Rs. 7 lakh under LRS is made in a financial year
for education purpose and other remittances in the same financial year of Rs. 7
lakh is made for medical treatment and Rs. 7 lakh for other purposes, whether
the exemption limit of Rs. 7 lakh shall be given to each of the three
separately?
Answer: It is clarified that
the threshold of Rs. 7 lakh for LRS is combined threshold for applicability of
the TCS on LRS irrespective of the purpose of the remittance. This is clear
from the first proviso to sub-section (1G) of section 206C of the Act. The
proviso states that the TCS is not required if the amount or aggregate of the
amounts being remitted by a buyer is less than seven Iakh rupees in a financial
year. The amendment by the Finance Act, 2023 has only restricted it to
education and medical treatment purpose. Now, after press release, old position
has been restored and the threshold continues to apply for seven lakh rupees in
a financial year, irrespective of the purpose.
Thus, in the given example, upto Rs. 7 lakh remittance
under LRS during a financial year shall not be liable for TCS. However,
subsequent Rs. 14 lakh remittance under LRS shall be liable for TCS in
accordance with the TCS rates applicable for such remittance.
In the example, if the remittances under LRS are
made in the current financial year at different point of time, TCS rates for
the remaining Rs. 14 lakh remittances under LRS would depend on the time of
remittance as TCS rates changes from 1't October 2023.
TCS rates would be applicable as under :--
First Rs. 7 lakh remittance
under LRS during the financial year 2023-24 for education purpose (or for that
matter any purpose)) No TCS Remittances beyond Rs. 7 lakh under LRS during the
financial year 2023-24, if on or before 30th September 2023 >TCS at 5%
(irrespective of the purpose unless it is for education purpose financed by
loan from a financial institution when the rate is 0.5%)
Remittances beyond Rs. 7 lakh
under LRS during the financial year 2023-24, if on or after 1't October 2023)
TCS at O.5% (if it is for education purpose financed by loan from a financial
institution), 5% (if it is for education or medical treatment) and 20% (if it
is for other purposes)
Question 3: Since there are
different TCS rates on LRS for the first six months and next six months of the
financial year 2023-24, whether the threshold of Rs. 7 lakh, for the TCS to
become applicable on LRS, applies separately for each six months?
Answer: No. The threshold of
Rs. 7 lakh, for the TCS to become applicable on LRS, applies for the full
financial year. If this threshold has already been exhausted; all subsequent
remittances under LRS, whether in the first half or in the second half, would
be liable for TCS at applicable rate.
Question 4: Whether the
threshold of Rs. 7 lakh, for TCS to become applicable on LRS, applies
separately for each remittance through different authorised dealers?
If not, how will authorised dealer know about the earlier
remittances by that remitter through some other authorised dealer?
Answer: lt is clarified that
the threshold of Rs. 7 lakh for LRS is qua remitter and not qua authorised
dealer. This is clear from the first proviso to sub-section (1G) of section
206C of the Act. The proviso states that the TCS is not required if the amount
or aggregate of amounts being remitted by a buyer is less than seven lakh
rupees in a financial year.
The threshold continues to apply qua remitter.
Since the facility to provide real time update of
remittance under LRS by remitter is still underdevelopment by the RBl, it is
clarified that the details of earlier remittances under LRS by the remitter
during the financial year may be taken by the authorised dealer through an
undertaking at the time of remittance. If the authorised dealer correctly
collects the tax at source based on information given in this undertaking, he
will not be treated as 'assessee in default'. However, for any false
information in the undertaking, appropriate action may be taken against the
remitter under the Act.
It is further clarified that same methodology of taking
undertaking from the buyer of overseas tour program package may be followed by
the seller of such package.
Question 5: There is
threshold of Rs. 7 lakh for remittance under LRS for TCS to become applicable
while there is another threshold of Rs. 7 lakh for purchase of overseas tour
program package where reduced rate of 5% TGS applies. Whether these two
thresholds apply independently?
Answer: Yes, these two
thresholds apply independently. For LRS, the threshold of Rs. 7 lakh applies to
make TCS applicable. For purchase of overseas tour program package, the
threshold of Rs. 7 lakh applies to determine the applicable TCS rate as 5% or
20o/o.
Question 6: A resident
individual spends Rs. 3 lakh for purchase of overseas tour program package from
a foreign tour operator and remits money which is classified under LRS. There
is no other remittance under LRS or purchase of overseas tour program during
the financial year. Whether TCS is applicable?
Answer: In case of purchase
of overseas tour program package which is classified under LRS, TCS provision
for purchase of overseas tour program package shall apply and not TCS
provisions for remittance under LRS.
Since for purchase of overseas tour program
package, the threshold of Rs. 7 lakh for applicability of TCS does not apply,
TCS is applicable and tax is required to be collected by the seller. In this
case the tax shall be required to be collected at 5% since the total amount
spent on purchase of overseas tour program package during the financial year is
less than Rs. 7 lakh. The TCS should be made by the seller.
Question 7: There are
different rates for remittance under LRS for medical treatment education
purposes and for other purposes. What is the scope of remittance under LRS for
medical treatment education purposes?
Answer: As per the
clarification by the RBI, remittance for the purposes of medical treatment
shall include, -
(i) remittance for purchase of
tickets of the person to be treated medically overseas (andhis attendant) for
commuting between lndia and the overseas destination;
(ii) his medical expense; and
(iii) other day to day expenses
required for such purpose.
It may be noted that code 50304 (under the Purpose Group
Name 'Travel'), in RBI master direction for LRS, pertains to travel
for medical treatment. As per BPM6, A.P. (DIR Series) Circular No. 50, dated
11 Feb 2016 this code covers the transactions which are related to health
services acquired by residents travelling abroad for medical reasons, which
includes medical services, other healthcare, food, accommodation and local
transport transactions.
In addition, code 51108 (under the Purpose Group Name
'Personal, Cultural & Recreational services') covers transactions
for health services rendered remotely or onsite (that is no travel by service
recipient is involved). This cover services from hospitals, doctors, nurses,
paramedical and similar services, etc. TCS provision for purpose of medical
treatment would apply when remittance is under code50304 or under code 51 108.
Education
Remittance for purpose of education shall include, --
(i) remittance for purchase of
tickets of the person undertaking study overseas for commuting between India
and the overseas destination;
(ii) the tuition and other fees
to be paid to educational institute; and
(iii) other day to day expenses
required for undertaking such study.
It may be noted that code 50305 (under the Purpose Group
Name 'Travel'), in RBI master direction for LRS, pertains to travel
for education (including fees, hostel expenses, etc). As per BPM6, A.P. (DIR
Series) Circular No. 50, dated 11 Feb 2016 this code covers education
related services such as tuition, food, accommodation, local transport and
health services acquired by resident students while residing overseas. In
addition, code 51107 (under the Purpose Group Name 'Personal, Cultural
& Recreational services') covers transactions for education (e.g. fees
for correspondence courses abroad) where the person receiving education does
not travel overseas.
TCS provision for purpose of education would apply when
remittance is under code 50305 or under 51 1 07.
Question 8: Whether purchase
of international travel ticket or hotel accommodation on standalone basis is
purchase of overseas tour program package?
Answer: The term overseas
tour program package' is defined as to mean any tour package which offers visit
to a country or countries or territory or territories outside lndia and
includes expenses for travel or hotel stay or boarding or lodging or any other
expenditure of similar nature or in relation thereto.
It is clarified that purchase of only international travel
ticket or purchase of only hotel accommodation, by in itself is not covered
within the definition of overseas tour program package'. To qualify as
overseas tour program package', the package should include at least two of the
followings:-
(i) international travel ticket,
(ii) hotel accommodation (with
or without food)/boarding/lodging,
(iii) any other expenditure of similar nature or
in relation thereto.