Section 206C(1G) of the Income Tax Act, 1961 mandates Tax Collected at Source (TCS) on:
- Outbound remittancesunder the Liberalised Remittance Scheme (LRS).
- Purchase of overseas tour packages.
This provision aims to track high-value foreign transactions and ensure tax compliance. Below is a detailed breakdown of its applicability, rates, exemptions, and compliance requirements.
1. Applicability
A. Transactions Covered
| CATEGORY | DESCRIPTION |
| LRS Remittances | Funds sent abroad for education, medical treatment, investments, gifts, etc. (up to $250,000/year). |
| Overseas Tour Packages | Bundled travel deals (flights + hotels) sold by tour operators. |
B. Who Collects TCS?
- Authorized Dealers (ADs): Banks/NBFCs for LRS remittances.
- Tour Operators: For overseas tour packages.
2. TCS Rates (Effective 1st April 2025)
| PURPOSE | THRESHOLD (₹) | TCS RATE |
| Education (loan-funded) | No limit | Nil |
| Education/Medical Treatment | Up to ₹10L | Nil |
| Above ₹10L | 5% | |
| Other LRS Purposes | Up to ₹10L | Nil |
| Above ₹10L | 20% | |
| Overseas Tour Packages | Up to ₹10L | 5% |
| Above ₹10L | 20% |
Note:
- PAN-Aadhaar linkage required(else 10% TCS for inoperative PAN).
- No TCSon international credit card spends abroad (postponed indefinitely).
3. Key Compliance Requirements
A. For Banks/ADs (LRS Remittances)
- Verify PAN and aggregate remittancesacross all banks.
- Deduct TCS at the earlier of:
- Payment receipt.
- Debit to buyer’s account.
- File Form 27EQ(quarterly) and issue Form 27D (TCS certificate).
B. For Tour Operators
- Collect TCS at 5%/20%(based on package value).
- Deposit TCS by the 7th of the next month(e.g., May 7 for April collections).
4. Exemptions
- Government entities(central/state, embassies).
- NRIs(remittances from NRO/NRE accounts).
- Education loans(no TCS if funded by financial institutions).
5. Penalties for Non-Compliance
| DEFAULT | CONSEQUENCE |
| Late TCS deposit | 1% monthly interest. |
| Non-filing of returns | ₹200/day penalty (max. TCS amount). |
| False declarations | Prosecution under Section 277. |
6. Recent Changes (Budget 2025)
- Threshold increasedfrom ₹7L to ₹10L.
- Education loan-funded remittancesfully exempted.
- Section 206CCA omitted(no higher TCS for non-filers).
7. How to Claim TCS Credit?
- Form 26AS/AIS: Verify TCS credits.
- Adjust against tax liabilitywhile filing ITR.
- Refund optionif TCS exceeds tax due.
8. Practical Examples
- ₹12L for Education (Non-Loan):
- TCS = 5% of ₹2L= ₹10,000 (since first ₹10L is exempt).
- ₹15L for Investments:
- TCS = 20% of ₹5L= ₹1L.
Key Takeaways
✔ TCS applies on LRS remittances >₹10L and overseas tours.
✔ Rates vary (0%/5%/20%) based on purpose.
✔ PAN-Aadhaar linkage crucial to avoid 10% TCS.
✔ Strict penalties for non-compliance.
