Whether to deduct TDS or collect TCS on payment made to " Foreign Tour Operators" in Income Tax for Overseas Tour Packages

 TCS on payment to Foreign Tour Operators for Overseas Tour Packages under Section 206C(1G)(b)

> The Seller/Tour Operator should collect TCS @ 5%

> If PAN/AADHAR of buyer is not available TCS @ 10% as per Section 206CC

> No minimum threshold, meaning, TCS will be applicable irrespective of the value of the tour package

TDS on payment to Foreign Tour Operators for Overseas Tour Packages under Section 194C

> The payer should collect TDS @ 1% or 2% based on the payee category

> If PAN/AADHAR of buyer is not available TCS @ 10% as per Section 206AA

> If payment likely to exceed Rs.1,00,000/- during the current financial year deduct TDS

Now question arises whether the buyer should deduct TDS U/s 194C or Seller should Collect TCS U/s 206C(1G)(b)? For answer it is the TDS which overrides the TCS provisions, meaning, TDS U/s 194C will be applicable in that case as per Section 206C(1G)(b) 5th Proviso which reads as under:

"Provided also that the provisions of this sub-section shall not apply, if the buyer is,—

 (i)  liable to deduct tax at source under any other provision of this Act and has deducted such amount;"

Decoding the above proviso:

> Is the buyer liable to deduct TDS? meaning, check the applicability of TDS U/s 194C

> The buyer must have deducted TDS. Meaning, the word used in the proviso is " and" so if the buyer not deducted TDS it is the responsibility of the seller to collect TCS

Important Point to remember 

      The buyer should deduct TDS based on the above provisions as otherwise the buyer will lose the benefit of claiming expenditure as otherwise available to him in accordance with the Income Tax Act further he may face the penalty in accordance with law. So, it is the onus of the buyer to deduct TDS and if he fails to deduct TDS it is the onus of the seller to collect TCS

Thanking You:

CA Kanhu Charan Samal