24 January 2024
My client was making a payment through Agoda travel agent for hotel booking worth Rs 23000.
He got this msg from SBI bank:
*Dear Customer, TDS of INR 2,301.90 deducted in account no XXXXX629200 on account of cash withdrawals under section 194N of Income Tax Act-SBI*
He contacted Bank inquiring about the same. Bank said it will show as TDS in your account however it is TCS deducted by bank. It is understood that this is tcs on foreign remittance. But still it does not match with the rules as according to rules tcs is 5% below 7 lakh remittance and 20% above it. And my client has not exceeded the limit. However once he had converted 4 lakh rupee to dollar but it was not used and again recoverted to rupee.
How can we challenge this in income tax dept. Pls guide
07 July 2024
The issue your client is facing seems to be related to the TCS (Tax Collected at Source) deduction by the bank under section 194N of the Income Tax Act, which pertains to cash withdrawals exceeding specified limits. Here’s how you can approach this situation:
### Understanding the Situation:
1. **TCS Deduction on Foreign Remittance**: It appears that the bank has deducted TCS on the foreign remittance made for the hotel booking through Agoda. TCS on foreign remittance is applicable under section 206C(1G) of the Income Tax Act.
2. **Applicability of TCS Rates**: The applicable TCS rate for foreign remittance is 5% if the amount exceeds Rs. 7 lakh in a financial year. Below this threshold, TCS is not applicable.
3. **Conversion of Rupees to Dollars**: Your client converted Rs. 4 lakhs into dollars previously, but it was not used and subsequently converted back to rupees. This might have triggered a reporting or monitoring mechanism by the bank.
### Steps to Challenge or Rectify:
1. **Review Bank Statement and Communication**: Ensure you have a clear understanding of the transaction details and the exact amount of TCS deducted. Verify the bank statement and any communication regarding the TCS deduction.
2. **Contact the Bank**: Seek clarification from the bank regarding the specific reasons for TCS deduction on this transaction. Request a detailed explanation and documentation supporting their deduction.
3. **Income Tax Department**: If the bank’s explanation does not align with the provisions of the Income Tax Act, you may consider challenging this with the Income Tax Department. Here’s how you can proceed:
- **Gather Documentation**: Collect all relevant documents related to the transaction, including bank statements, communications with the bank, and details of the foreign remittance.
- **File a Grievance**: File a grievance or complaint with the Income Tax Department, explaining the situation and providing supporting documents. This can often be done through the Income Tax Department’s e-filing portal or by visiting the local Income Tax office.
- **Seek Rectification**: Request the Income Tax Department to rectify the TCS deduction if it is found to be incorrect or not in accordance with the provisions of the Income Tax Act.
4. **Consult a Tax Professional**: If the issue remains unresolved or if you need assistance in navigating the process, it’s advisable to consult a tax professional or chartered accountant. They can provide personalized guidance based on the specifics of your client’s case and help with documentation and representation before tax authorities if needed.
### Conclusion:
Challenging TCS deductions involves a process of verification, communication with the bank, and potentially filing a complaint with the Income Tax Department. Ensure all documentation is in order and seek professional advice to navigate this process effectively.
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