{"id":7916,"date":"2024-09-15T15:10:27","date_gmt":"2024-09-15T15:10:27","guid":{"rendered":"https:\/\/www.caindelhiindia.com\/blog\/?p=7916"},"modified":"2024-09-15T15:18:35","modified_gmt":"2024-09-15T15:18:35","slug":"collection-of-tcs-on-overseas-travel-packages","status":"publish","type":"post","link":"https:\/\/www.caindelhiindia.com\/blog\/collection-of-tcs-on-overseas-travel-packages\/","title":{"rendered":"Collection of TCS on Overseas Travel Packages"},"content":{"rendered":"<h2><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-5540\" src=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/04\/Tax-collection-at-source-on-foreign-or-overseas-tour-package..jpeg\" alt=\"TCS on foreign or overseas tour package.\" width=\"928\" height=\"464\" srcset=\"https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/04\/Tax-collection-at-source-on-foreign-or-overseas-tour-package..jpeg 318w, https:\/\/www.caindelhiindia.com\/blog\/wp-content\/uploads\/2023\/04\/Tax-collection-at-source-on-foreign-or-overseas-tour-package.-300x150.jpeg 300w\" sizes=\"(max-width: 928px) 100vw, 928px\" \/><\/h2>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_58 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<p class=\"ez-toc-title\">Table of Contents<\/p>\n<label for=\"ez-toc-cssicon-toggle-item-69f58730dde9d\" class=\"ez-toc-cssicon-toggle-label\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/label><input type=\"checkbox\"  id=\"ez-toc-cssicon-toggle-item-69f58730dde9d\"  aria-label=\"Toggle\" \/><nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-2'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/www.caindelhiindia.com\/blog\/collection-of-tcs-on-overseas-travel-packages\/#Collection_of_TCS_on_Overseas_Travel_Packages_Rule_206C1Ga_applicability\" title=\"Collection of TCS on Overseas Travel Packages (Rule 206C(1G)(a) applicability)\">Collection of TCS on Overseas Travel Packages (Rule 206C(1G)(a) applicability)<\/a><ul class='ez-toc-list-level-3'><li class='ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/www.caindelhiindia.com\/blog\/collection-of-tcs-on-overseas-travel-packages\/#Statutory_Obligation_on_Rule_206C1Ga_applicability\" title=\"Statutory Obligation on Rule 206C(1G)(a) applicability:\">Statutory Obligation on Rule 206C(1G)(a) applicability:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/www.caindelhiindia.com\/blog\/collection-of-tcs-on-overseas-travel-packages\/#Clients_Refusal_to_follow_Rule_206C1Ga\" title=\"Client&#8217;s Refusal to follow Rule 206C(1G)(a):\">Client&#8217;s Refusal to follow Rule 206C(1G)(a):<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/www.caindelhiindia.com\/blog\/collection-of-tcs-on-overseas-travel-packages\/#Immediate_Steps_to_be_taken_by_client\" title=\"Immediate Steps to be taken by client:\">Immediate Steps to be taken by client:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/www.caindelhiindia.com\/blog\/collection-of-tcs-on-overseas-travel-packages\/#Must_update_the_Indemnity_Clause_in_the_client_contract\" title=\"Must update the Indemnity Clause in the client contract: \">Must update the Indemnity Clause in the client contract: <\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-6\" href=\"https:\/\/www.caindelhiindia.com\/blog\/collection-of-tcs-on-overseas-travel-packages\/#Chartered_Accountants_must_obtain_a_Written_Undertaking_from_clients\" title=\"Chartered Accountants must obtain a Written Undertaking from clients:\">Chartered Accountants must obtain a Written Undertaking from clients:<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-7\" href=\"https:\/\/www.caindelhiindia.com\/blog\/collection-of-tcs-on-overseas-travel-packages\/#CA_must_Review_Revise_Contracts_is_a_Long-term_Solutions\" title=\"CA must Review &amp; Revise Contracts is a Long-term Solutions\">CA must Review &amp; Revise Contracts is a Long-term Solutions<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-3'><a class=\"ez-toc-link ez-toc-heading-8\" href=\"https:\/\/www.caindelhiindia.com\/blog\/collection-of-tcs-on-overseas-travel-packages\/#Final_Thoughts_on_this_Complex_Situation\" title=\"Final Thoughts on this Complex Situation \">Final Thoughts on this Complex Situation <\/a><\/li><\/ul><\/li><\/ul><\/nav><\/div>\n<h2><span class=\"ez-toc-section\" id=\"Collection_of_TCS_on_Overseas_Travel_Packages_Rule_206C1Ga_applicability\"><\/span><span style=\"color: #000080;\"><strong>Collection of TCS on Overseas Travel Packages (Rule 206C(1G)(a) applicability)<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h2>\n<p>When corporate client not ready to pay us TDS amount @20 percent as per rule 206 C (1G) (a). But client we will deduct TDS on our payment Now Client is saying only 2 percent TDS will deduct on total payment. How CA will handle the situation where Client receiving overseas package payments from a corporate client (end-user).<\/p>\n<ul>\n<li>In case Client refuses to pay 20% TCS as per Rule 206C(1G)(a).<\/li>\n<li>Client offers to deduct 2% TDS (Tax Deducted at Source) instead.<\/li>\n<\/ul>\n<p>This is indeed a complex tax scenario under Rule 206C(1G)(a) of the Income-tax Act, 1961, concerning the collection of Tax Collected at Source on overseas travel packages. How CA will handle this situation when client refuses to deduct the TCS while Client receiving overseas package payments from a corporate client.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Statutory_Obligation_on_Rule_206C1Ga_applicability\"><\/span><span style=\"color: #000080;\"><strong>Statutory Obligation on Rule 206C(1G)(a) applicability<\/strong>:<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>As per Rule 206C(1G)(a), you&#8217;re legally required to collect 20% TCS on the consideration received for overseas travel services from non-residents (including NRIs and foreign nationals). \u00a0Rule 206C(1G)(a): This rule mandates that any person providing services of international travel to a non-resident Indian (NRI) or a foreign national must collect Tax collected at source at 20% of the consideration received. \u00a0This is a non-negotiable statutory obligation.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Clients_Refusal_to_follow_Rule_206C1Ga\"><\/span><span style=\"color: #000080;\"><strong>Client&#8217;s Refusal to follow Rule 206C(1G)(a)<\/strong>:<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>The client\u2019s preference to deduct 2% TDS instead of 20% Tax collected at source may stem from a misunderstanding of tax laws. Tax collected at source and TDS serve different purposes\u2014TDS is deducted on income payments (under Section 195 for non-residents), whereas TCS under Rule 206C(1G)(a) is a tax collected at the source for specific transactions, including overseas travel packages. Non-compliance Risk: If you fail to collect the 20% TCS, you may face penalties, interest, and possible scrutiny from tax authorities.<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Immediate_Steps_to_be_taken_by_client\"><\/span><span style=\"color: #000080;\"><strong>Immediate Steps to be taken by client:<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p><strong>Educate the Client<\/strong>: Politely explain that TCS is a statutory requirement and cannot be substituted by TDS. Highlight that TCS is imposed on the sale of overseas packages and collected upfront, while TDS is deducted on income payments. The 20% TCS is not a discretionary tax but a legal mandate. Share official documents or references to Rule 206C(1G)(a) to substantiate your position.<\/p>\n<p><strong>Indemnity Clause<\/strong>: If the client remains insistent, include an indemnity clause in your agreement. The clause should protect you from potential tax liabilities due to the client\u2019s refusal to pay TCS. Here is a refined indemnity clause example:<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Must_update_the_Indemnity_Clause_in_the_client_contract\"><\/span><span style=\"color: #000080;\"><strong>Must update the Indemnity Clause in the client contract: <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>&#8220;The Client agrees to indemnify and hold harmless [Your Company Name] from any claims, demands, penalties, interest, losses, damages, costs, and expenses arising out of the Client&#8217;s failure to comply with Rule 206C(1G)(a) of the Income-tax Act, 1961, including the non-payment of the 20% TCS on overseas travel packages. Should any liabilities arise due to non-compliance, the Client will bear all associated costs, including additional taxes and penalties imposed by tax authorities.&#8221;<\/p>\n<h3><span class=\"ez-toc-section\" id=\"Chartered_Accountants_must_obtain_a_Written_Undertaking_from_clients\"><\/span><span style=\"color: #000080;\"><strong>Chartered Accountants must obtain a Written Undertaking from clients<\/strong>:<\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Ask the client to provide a written undertaking that indemnifies you and assumes responsibility for any consequences arising from the non-collection of 20% TCS. Politely explain to the client that TCS is a statutory requirement and cannot be waived or reduced. Emphasize that the 20% TCS rate is applicable on the overseas package as per Rule 206C(1G)(a).<\/li>\n<li>Chartered Accountants must Verify the client&#8217;s TDS deduction claim is legitimate and in line with Indian tax laws. &amp; Chartered Accountants must ensure you maintain documentation supporting the transaction and client&#8217;s indemnity undertaking.<\/li>\n<li>Ensure the client provides the necessary documentation to support the TDS deduction, should they proceed with that course. Ask the client to reconsider their proposal and agree to pay the applicable Tax collected at source amount of 20%. If they&#8217;re still unwilling, you may need to explore alternative solutions.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"CA_must_Review_Revise_Contracts_is_a_Long-term_Solutions\"><\/span><span style=\"color: #000080;\"><strong>CA must Review &amp; Revise Contracts is a Long-term Solutions<\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<ul>\n<li>Review your agreements with clients and ensure tax responsibilities (TCS\/TDS) are clearly defined.<\/li>\n<li>Add explicit clauses in your contracts stating the legal obligation to collect TCS and the potential tax consequences of non-compliance. Include the indemnity clause as a standard practice in case of future disputes.<\/li>\n<li>Since this issue involves potential penalties and statutory non-compliance, consulting a tax professional or legal advisor is essential. They can help you assess the tax implications, explore possible solutions, and ensure your business is protected against risks.<\/li>\n<\/ul>\n<h3><span class=\"ez-toc-section\" id=\"Final_Thoughts_on_this_Complex_Situation\"><\/span><span style=\"color: #000080;\"><strong>Final Thoughts on this Complex Situation <\/strong><\/span><span class=\"ez-toc-section-end\"><\/span><\/h3>\n<p>While the client may want to avoid the 20% Tax collected at source, it is crucial to clarify that this tax is mandated by law. If they insist on deducting 2% TDS, the indemnity clause becomes even more vital to shield you from legal and financial repercussions. Moreover, updating your agreements to handle similar cases in the future will provide long-term protection. You can consider including an indemnity clause in the agreement, which would protect your company from any potential tax liabilities arising from the client&#8217;s refusal to pay the applicable Tax collected at source amount. The clause could state that the client will indemnify your company against any tax demands, penalties, or interest that may arise due to their non-compliance with Tax collected at source provisions<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Collection of TCS on Overseas Travel Packages (Rule 206C(1G)(a) applicability) When corporate client not ready to pay us TDS amount @20 percent as per rule 206 C (1G) (a). But client we will deduct TDS on our payment Now Client is saying only 2 percent TDS will deduct on total payment. How CA will handle &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_mi_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[100],"tags":[972],"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/7916"}],"collection":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/comments?post=7916"}],"version-history":[{"count":4,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/7916\/revisions"}],"predecessor-version":[{"id":7919,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/posts\/7916\/revisions\/7919"}],"wp:attachment":[{"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/media?parent=7916"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/categories?post=7916"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.caindelhiindia.com\/blog\/wp-json\/wp\/v2\/tags?post=7916"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}