Finance Bill 2020 proposes amendment to levy 5 pc tax on overseas remittance
T
he Finance Bill 2020 has proposed an amendment to Section 206C to levy 5 per cent tax collection at source (TCS) on overseas remittance and for the sale of the overseas tour package.
In a statement on Friday, the Ministry of Finance said "The government imposed a tax collection at source (TCS), akin to TDS on remittances after an internal survey by the income tax department which showed that not only year on year more and more money is being sent under LRS but also a large number of those sending out money had not filed income tax returns."
"Of the 5,026 sample cases of foreign remittance surveyed, it was found that 1,807 did not file returns. In the FY 2018-19, $14 billion were sent out using the liberalised remittance scheme. However, in 2009- 2010 LRS remittances were less than USD 1 billion. Also, as per the findings of the sample survey, no returns were filed for around 24 per cent of the amount sent by these 5026 remitters," the statement said.
Revenue Secretary Dr Ajay Bhushan Pandey said "Contrary to misinterpretation in a certain section of media, 5 per cent TCS on foreign remittance is not an additional or new tax".
"It is like TDS which you can adjust against your total income tax liability. This move is to make remitter file income tax return. We have data that shows many persons who transferred funds abroad under this scheme did not file income tax returns. Normally people remitting big amounts should be in income tax bracket and paying income taxes", said Dr Pandey.
One can get his or her monthly TDS reduced if she or he is a salaried individual or adjust against advance tax payment when the next instance falls due, the Revenue Secretary said.
Giving a background, the statement said, "Under the liberalised remittance scheme individuals are allowed to send out $250,000 in a year. Once the Finance Bill is passed, a 5 per cent TCS will be levied on such foreign remittance."
According to the budget provision, any authorised dealer receiving an amount or an aggregate of amounts of seven lakh rupees or more in a financial year for remittance out of India under the scheme is required to deduct 5 per cent TCS, the statement said.
In cases where such remittances not supported by PAN or Aadhaar the TCS rate would be 10 per cent. This TCS can be adjusted against the final tax liability of the person and is designed to get such persons to file tax returns.
The Enforcement Directorate (ED) has come across a number of cases in which the liberalised remittance scheme was used by commodity traders to carry out a hawala operation in the Middle-East.
There have even been instances of misuse of this window to send money more than the permissible limit. TCS will allow for better tracking and allow the department to at least collect some tax on these transactions. If a person does not file return, the government would get to keep this 5 per cent amount.
Section 206C deals with tax collection at source and the government is been gradually widening its ambit to include more transactions. The 2016 budget had imposed one per cent TCS on the purchase of cars costing over Rs 10 lakh. This was done to ensure that those who are purchasing costly cars should not get away without disclosing their real income and paying income tax.
✔️ Finance Bill 2020 proposes amendment to levy 5 pc tax on overseas remittance
💕 Found this article helpful? Spread the word and support us!