The income tax department has exempted non-resident corporate entities and firms not having a permanent establishment or a fixed place of business in India from 5% tax collected at source (TCS) on foreign remittances and tour packages, reducing their compliance burden.
The Central Board of Direct Taxes (CBDT) has notified the changes to the income tax rules and expanded the scope of exemption that was previously available only to non-resident individuals under section 206(1G) of the I-T Act, according to a notification dated August 17.
Section 206C(1G) was introduced by Finance Act, 2020, effective October 2020 to keep a tab on foreign currency spending by persons resident in India. The provision requires TCS at the rate of 5% on foreign remittances of Rs 7 lakh or more under the Liberalized Remittance Scheme (LRS) of RBI.
The TCS was to be deducted by domestic tour operators on money received from non-resident Indians visiting India and booking their overseas tour package from the country.