Section - 206C, Income-tax Act-Amendment

Section - 206C, Income-tax Act-Amendment

Section 206C:-

        Section 206C of the Act provides for the collection of tax at source (TCS) on business of trading in alcohol, liquor, forest produce, scrap etc. Sub-section (1) of the said section, inter-alia, provides that every person, being a seller shall, at the time of debiting of the amount payable by the buyer to the account of the buyer or at the time of receipt of such amount from the said buyer in cash or by the issue of a cheque or draft or by any other mode, whichever is earlier, collect from the buyer of certain goods a sum equal to specified percentage, of such amount as income-tax.
             In order to widen and deepen the tax net, it is proposed to amend section 206C to levy TCS on overseas remittance and for sale of overseas tour package, as under: 
  • An authorised dealer receiving an amount or an aggregate of amounts of Rs.7 Lakhs or more in a financial year for remittance out of India under the LRS of RBI, shall be liable to collect TCS, if he receives sum in excess of said amount from a buyer being a person remitting such amount out of India, at the rate of 5%. In nonPAN/Aadhaar cases the rate shall be 10%.
  • A seller of an overseas tour program package  who receives any amount from any buyer, being a person who purchases such package, shall be liable to collect TCS at the rate of 5%. In non-PAN/ Aadhaar cases the rate shall be 10%.
In above two scenarios,if authorised dealer receives 7 lakhs or more for remittance,then he has to collect tax.But in case of seller of overseas tour program,if he receives any amount(for eg.Rs.1000),even then he has to collect tax.Please note that there is no threshold limit in second case.

  • The above TCS provision shall not apply if the buyer is,-
  1. liable to deduct tax at source under any other provision of the Act and he has deducted such amount. 
  2. the Central Government, a State Government , an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State,  a local authority as defined in Explanation to clause (20) of section 10 or any other person notified by the Central Government in the Official Gazette for this purpose subject to such conditions as specified in that notification.
  • “authorised dealer” is proposed to be defined to mean a person authorised by the Reserve Bank of India under sub-section (1) of section 10 of Foreign Exchange Management Act, 1999 to deal in foreign exchange or foreign security. 
  • “Overseas tour program package” is proposed to be defined 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 expense of similar nature or in relation thereto.
Further, in order to widen and deepen the tax net, it is proposed to amend section 206C to levy TCS on sale of goods above specified limit, as under: 
  •  A seller of goods is liable to collect TCS at the rate of 0.1% on consideration received from a buyer in a previous year in excess of Rs.50 Lakhs. In non-PAN/ Aadhaar cases the rate shall be 1%.
  • Only those seller whose total sales, gross receipts or turnover from the business carried on by it exceed Rs.10 Crores during the financial year immediately preceding the financial year(i.e.Last FY), shall be liable to collect such TCS.
  • Central Government may notify person, subject to conditions contained in such notification, who shall not be liable to collect such TCS.
  • No TCS is to be collected from the Central Government, a State Government and an embassy, a High Commission, legation, commission, consulate, the trade representation of a foreign State, a local authority as defined in 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 conditions as prescribed in such notification.
  • No such TCS is to be collected, if the seller is liable to collect TCS under other provision of section 206C or the buyer is liable to deduct TDS under any provision of the Act and has deducted such amount.
These amendments will take effect from 1st April, 2020. 
Section - 206C, Income-tax Act-Amendment Section - 206C, Income-tax Act-Amendment Reviewed by CA Aditya Rane on February 10, 2020 Rating: 5

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