TCS is an additional sum collected as tax from the buyer at the time of sale by a seller of designated items, in addition to the sale amount, and remitted to the government account. It is mentioned in Section 206C of the Income Tax Act of 1961.
The Government of India implemented a TCS rate of 20% on international remittances over Rs 7 lakh in a fiscal year beginning October 1, 2023. The higher tax will not apply to education or medical expenses incurred abroad. The previous tax rate was 5%.
Certain individuals, known as sellers, are required by tax regulations to collect a percentage of tax when money is received from buyers. Aside from commodity sales, anyone who leases, licenses, or contracts for a parking lot, toll plaza, mining, or quarrying will receive a 2% commission from TCS.
What actions should the tax collector and payer take?
The individual collecting tax must get a tax collection account number (TAN) and include it on all challans, certificates, returns, and other transaction-related papers. The buyer, on the other hand, will provide the seller with his permanent account number, failing which tax will be levied at the higher rate (twice or 5%, whichever is greater). The TCS collector must present the purchaser of the goods with a TCS certificate in form 27D.
What is the relationship between TCS and LRS policy?
The higher TCS rate of 20% applies to foreign remittances made through the RBI's liberalized remittances scheme and the sale of abroad travel packages.
What exactly is LRS?
The liberalized remittances system (LRS) allows Indians to freely transfer up to $250,000 in one year without the Reserve Bank of India's (RBI) clearance. Any remittance in excess of this amount necessitates an official nod from the regulator.
Is this the last tax?
This isn't the last tax. If the TCS payee is a taxpayer, the TCS can be claimed as a credit when filing an income tax return.