Vivek Jalan, Partner, Tax Connect Advisory, Multi-Disciplinary Tax Consultancy Firm
In order to increase TCS on certain foreign remittances and on sale of overseas tour packages, an amendment was proposed in Section 206C(1G) of the Income Tax Act wherein TCS @20% was proposed on remittances for foreign tour packages. The payment for these foreign tour packages can also be made vide international credit cards. The Rules for use of International credit cards and debit cards are laid down by the RBI and any payment for prohibited items like lottery tickets, etc is already tracked by The RBI wherein the holder of the Credit Card have to provide the details of the expenses. Now, the Hon’ble Minister of Finance has required that RBI goes one step further and not only tracks, but even collects this 20% TCS at source on expenses for foreign tours made by such international credit card holders. Possibly this could only be done by a process wherein the holder of international credit card, before making any payment, would be asked by a pop-up message on the nature of the transaction and when he does so, TCS would be automatically triggered and instead of say $10,000 and extra $2000 is collected. It may be just like an online payment made for say booking of a ticket wherein while your ticket value is Rs.10,000, but a final payment approval of an excess amount is sought before payment is processed.
It is important to note that while TCS is merely advance collection of tax on a payment made, the purpose was to track whether people making high-value remittances reflected proportionately high income in their tax returns.