CBDT gives TCS relief to overseas businesses

1 min read 18 Aug 2022, 09:32 PM IST Join us

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CBDT said provisions relating to 5% TCS under section 206C of the Income Tax Act shall not apply to these entities

In March, non-residents visiting India availing of services of domestic tour operators were excluded from the provision, explained Aravind Srivatsan, Tax Leader, Nangia Andersen LLP. Photo: iStock

NEW DELHI : The Central Board of Direct Taxes (CBDT) has relaxed the norms to exclude payments made by non-resident entities to domestic tour operators from the tax collected at source (TCS) requirement, showed an official order.

CBDT said in a notification that provisions relating to 5% TCS under section 206C of the Income Tax Act shall not apply to these entities.

Experts said that Section 206C(1G) was introduced through Finance Act of 2020 from October 2020 to keep a tab on forex spending by persons resident in India. It mandates a 5% TCS on the funds collected by an authorised forex dealer for remittance out of India under the liberalised remittance scheme of RBI as well as by domestic tour operators for overseas tour package for consideration in excess of Rs. 700,000.

In March, non-residents visiting India availing of services of domestic tour operators were excluded from the provision, explained Aravind Srivatsan, Tax Leader, Nangia Andersen LLP.

Now with the latest notification, the scope of exemption has been broad based to also exempt collection of TCS from non-residents who do not have a permanent establishment (place of business) in India, which could include corporate and professional firms who were availing of such services, said Srivatsan.

“CBDT has expanded the benefit of exemption from TCS obligations under section 206(1G) from an ‘Individual’ to a ‘person’ for corporate entities, firms, LLPs, etc. that are not residents and do not have a permanent establishment, which was previously available only to non-resident Individuals only, via notification dated 30th March, 2022," said Om Rajpurohit – Director (Corporate & International Tax) with AMRG & Associates, an accounting firm. Srivatsan said the move would reduce non-residents‘ tax collection burden.

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