TDS ON STUDY ABROAD
5% TDS will be deducted by your bank if you are sending college fee or hostel charges out of India.
Budget 2020 proposed by Finance Minister Ms. Nirmala Sitharaman will make your vision of studying overseas or enjoying an exciting overseas vacation more costly. Reason being new provisions for collecting TCS (Tax Collected at Source) introduced for and after the year 2020-21.
This Articles discusses the numerous problems that arise from the proposal. Section 206C(1G)of the Income Tax Act,1961 as set out below:-
I At the time of debiting the amount payable by the purchaser or at the time of receiving such amount from the purchaser, any person who receives any amount from the purchaser shall collect from the purchaser by any mode, whichever is earlier, a sum equal to five per cent of the amount payable by the purchaser as income tax:
(ii) "Overseas Tour Program Package" means any tour package that provides visits to a country or nation or territory or territories outside India and includes travel or hotel or boarding or lodging expenses or other specific or related expenses.
Then there are the issues which need consideration:-
1. The new TCS regulations on "Overseas Tour Packages" require that a seller of an Overseas Tour Package collect TCS at a rate of 5 percent (if PAN / Aadhar is available) and 10 percent (if PAN / Aadhar is not available) of the total amount from the buyer upon receipt of the tour package payment and include travel or hotel stay or boarding or lodging expenses.
2. TCS applicability does not have a threshold limit. TCS is applicable to all Tour Operators, including those who have just started their business, from day one.
3. It requires that every seller collect from Buyer regardless of where they are in the situation. That is, if a buyer from India is facilitated to visit outside India by a seller outside India, or if a buyer from India books a package for visiting outside India, it becomes important.
4. It will be worth noting that TCS will only apply in the case of a "Overseas Tour Package," regardless of the purpose of the trip. Independent activities aren't a package. In the literal sense, the sale of independently done air tickets and hotel reservations does not call for tax collection at source.
5. TCS must be carried out at the overall expense of the customer including GST. TCS thus obtained and payable should be available in the buyer's hands for tax credit. Every buyer must have PAN or Aadhar to get the credit. Further Tour Package Sellers shall not receive TCS from those Buyers who are expected to comply with TDS under the Income Tax Act,1961.
The implementation of TCS would definitely raise the local companies' enforcement costs and would be counter to the ease of doing business. It may give the foreign travel companies an unfair advantage. Nonetheless, it was implemented as per the government with the intention of plugging tax leakage.
Budget 2020 proposed by Finance Minister Ms. Nirmala Sitharaman will make your vision of studying overseas or enjoying an exciting overseas vacation more costly. Reason being new provisions for collecting TCS (Tax Collected at Source) introduced for and after the year 2020-21.
This Articles discusses the numerous problems that arise from the proposal. Section 206C(1G)of the Income Tax Act,1961 as set out below:-
I At the time of debiting the amount payable by the purchaser or at the time of receiving such amount from the purchaser, any person who receives any amount from the purchaser shall collect from the purchaser by any mode, whichever is earlier, a sum equal to five per cent of the amount payable by the purchaser as income tax:
(ii) "Overseas Tour Program Package" means any tour package that provides visits to a country or nation or territory or territories outside India and includes travel or hotel or boarding or lodging expenses or other specific or related expenses.
Then there are the issues which need consideration:-
1. The new TCS regulations on "Overseas Tour Packages" require that a seller of an Overseas Tour Package collect TCS at a rate of 5 percent (if PAN / Aadhar is available) and 10 percent (if PAN / Aadhar is not available) of the total amount from the buyer upon receipt of the tour package payment and include travel or hotel stay or boarding or lodging expenses.
2. TCS applicability does not have a threshold limit. TCS is applicable to all Tour Operators, including those who have just started their business, from day one.
3. It requires that every seller collect from Buyer regardless of where they are in the situation. That is, if a buyer from India is facilitated to visit outside India by a seller outside India, or if a buyer from India books a package for visiting outside India, it becomes important.
4. It will be worth noting that TCS will only apply in the case of a "Overseas Tour Package," regardless of the purpose of the trip. Independent activities aren't a package. In the literal sense, the sale of independently done air tickets and hotel reservations does not call for tax collection at source.
5. TCS must be carried out at the overall expense of the customer including GST. TCS thus obtained and payable should be available in the buyer's hands for tax credit. Every buyer must have PAN or Aadhar to get the credit. Further Tour Package Sellers shall not receive TCS from those Buyers who are expected to comply with TDS under the Income Tax Act,1961.
The implementation of TCS would definitely raise the local companies' enforcement costs and would be counter to the ease of doing business. It may give the foreign travel companies an unfair advantage. Nonetheless, it was implemented as per the government with the intention of plugging tax leakage.
