CBDT exempts non-resident companies from TCS on overseas remittances and tour packages

Legal persons and non-resident companies have benefited from a reduction in their withholding tax (TCS) on transfers of foreign funds and organized trips. The Income Tax Department has exempted those taxpayers who have no permanent establishment or fixed establishment in India from 5% TCS on remittances and tour packages.

The statutory authority of the Central Board of Direct Taxes (CBDT) has made amendments to Section 206(1G) of the Income Tax Act and also widened the scope of the exemption.

Previously, Section 206 (1G) provided for the levying of a tax by a seller of a package tour abroad from a purchaser, being a person purchasing such a tour, at the rate of 5% of the amount of the organized trip.

The section was introduced in the Finance Act 2020 and came into force in October 2020. The aim was to keep an eye on the foreign exchange expenditure of people residing in India.

Previously, the provisions of the section applied only to non-resident persons visiting India. On March 31 this year, CBDT notified that a domestic tour operator is not required to collect the tax on the sale of overseas tour packages to non-residents visiting India. This was announced after taking note of representations from domestic tour operators who were facing difficulties in recovering taxes from non-residents visiting India who booked an overseas tour package with these domestic tour operators.

But now, the scope of the exemption under Section 206(1G) also applies to corporations, companies and LLPs that are not resident and do not have permanent establishments in the country.

AMRG & Associates Director (Corporate & International Tax) Om Rajpurohit said that by expanding the scope of the exemption (which was previously only available to non-resident individuals) under Section 206(1G) d ‘an ‘Individual’ to a ‘Person’, the CBDT has effectively also exempted corporations, firms, LLPs, etc. who are not residents and do not have a permanent establishment of TCS obligations, which appeared to discriminate against other categories of persons, reported by PTI.

Rajpurohit added that this will result in reduced compliance burden for non-residents and greater confidence in Indian tax laws that apply to foreign entities.

Catch all the trade news, market news, breaking news and latest updates on Live Mint. Download the Mint News app to get daily market updates.

More less

To subscribe to Mint Bulletins

* Enter a valid email

* Thank you for subscribing to our newsletter.