Tax collected at source on foreign travel: All you need to know about TCS, consequences of late, incorrect filing

Do you know that from October 1, the Government of India (GOI) will levy 20 per cent Tax Collected at Source (TCS) on foreign tour packages?

Don’t worry. First, you must understand what TCS is. It isn’t an additional tax. You can adjust it against your total income tax liability or claim it back while filing income tax returns (ITR).

How much tax do I have to pay? Calculate now

In simple terms, it is a tax collected by the agent (issuer) from you (buyer) on booking tour packages, and the agent then deposits the TCS with the tax authorities. Agents can collect this tax from you upfront and are not liable for paying it themselves.

In this piece, Archit Gupta, Founder and CEO of ClearTax, explains TCS in detail.

BT: What is TCS? 

AG: TCS is the tax collected by the seller from the buyer on sale so that it can be deposited with the tax authorities. Section 206C of the Income-tax Act governs the goods on which the seller has to collect tax from the buyers. Such persons must have the Tax Collection Account Number to be able to collect TCS.

BT: Should sellers collect TCS on an amount inclusive of GST? 

AG: As per income tax law, the seller shall collect TCS from the buyer at the time of debiting the amount payable to the buyer’s account or at the time of receipt of such amount from the said buyer by any mode, whichever is earlier. So, the amount debited to the buyer’s account or payment received by the seller shall be inclusive of VAT/excise/GST. Hence, one should collect the TCS inclusive of GST.

Also read: Here is how you can save on foreign travels if you’re planning to visit abroad before September 30

Also read: Here’s how you can reduce the TCS hit on your foreign trip

Also read: I’m 57 and work for a private firm. How much should I to invest to get Rs 25,000 monthly after retirement?

BT: What are the consequences of late filing of a TCS return? 

AG: If the person fails to file the TCS return on or before the due date prescribed in the income tax law, a fee of Rs 200 per day must be paid, during which the failure continues. However, the amount of late fees shall not exceed the amount of TCS. One should deposit the late filing fees before filing the TCS return. Note that Rs 200 per day is a late filing fee, not a penalty.

BT: Is there any penalty for incorrect filing of the TCS return? 

AG: Penalty under Section 271H can also be levied if the tax collector files an incorrect TCS return. In other words, a minimum penalty of Rs 10,000 and a maximum penalty of up to Rs 1,00,000 can be levied if the collector files an incorrect TCS return.

BT: Is tax collected at source refundable? 

AG: Yes, the TCS collected on a buyer’s PAN is available for adjustment just like the TDS.