07 July 2024
The deduction of TCS (Tax Collected at Source) by the bank in this case is likely under section 206C(1G) of the Income Tax Act, which pertains to foreign remittances for specified transactions. Here’s an explanation of how this applies:
### Understanding TCS on Foreign Remittances:
1. **Section 206C(1G)**: This section of the Income Tax Act mandates that an authorized dealer, such as a bank, must collect TCS at the rate of 5% if the amount of foreign remittance exceeds Rs. 7 lakh in a financial year. This applies to remittances made for purposes including overseas travel bookings, education payments abroad, etc.
2. **Applicability**: TCS under section 206C(1G) is applicable when an Indian resident makes a payment to a foreign entity for specified transactions. In your client’s case, booking an international hotel through Agoda involves making a payment to a foreign entity (Agoda being a foreign travel agent).
3. **TCS Deduction**: The bank deducts TCS at the rate of 5% on the total amount of Rs. 23,000 paid for the international hotel booking. Therefore, 5% of Rs. 23,000 amounts to Rs. 1,150 as TCS.
### Clarification from the Bank:
- The bank mentioned that it will show as TDS in the account statement, but clarified that it is TCS deducted. This distinction is crucial because TDS (Tax Deducted at Source) is typically deducted by the payer, whereas TCS is collected by the seller or the authorized dealer (in this case, the bank).
### How to Proceed:
- **Documentation**: Ensure you have documentation such as the bank statement, communication with the bank, and details of the transaction (booking receipt from Agoda).
- **Verification**: Verify the TCS amount deducted by the bank and cross-check it with the provisions of section 206C(1G).
- **Further Action**: If there are any discrepancies or if you need further clarification, you can contact the bank for more details. If needed, consult with a tax professional who can assist in understanding the implications and ensuring compliance with tax laws.
### Conclusion:
The deduction of TCS under section 206C(1G) is aimed at ensuring tax compliance on foreign remittances for specific purposes. It’s important to understand the provisions and ensure that proper documentation and compliance steps are followed to avoid any issues with tax authorities.
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