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The vast majority of people have heard of Tax Collected At Source, which may be found in section B of Form 26AS under Section 206CQ.

What Exactly is This Section 206CQ?

The Income Tax Act of 1961 does not have a section with the number 206CQ.

The explanation of Section 206CQ which is included in Form 26AS explains that it is concerned with the collection of tax at the source for remittances that are made as part of the Liberalized Remittance Scheme.

206CQ is just a TCS deposit challan code. Section 206C(IG) is the specific section that addresses the issue of tax collected at the source on foreign remittances.

What Exactly is Section 206C(1G)?

According to the provisions of Section 206C(1G), every person:

  • Being an authorized dealer who receives the money, for remittance out of India, from a buyer who is a person remitting such an amount out of India in accordance with the Liberalized Remittance Scheme established by the Reserve Bank of India.
  • Being a vendor of an overseas tour program package and receiving payment of any kind from a customer; being a buyer of such a package; being the person who sells the package.

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Shall collect from the buyer, an amount as stipulated as income-tax, either at the time of debiting the amount payable by the buyer or at the time of receiving such money from the said buyer, by whatever method, whichever occurs first, in order to satisfy the requirements of the law.

What is the TCS Rate?

Every dealer is required to collect a payment equal to five per cent of the amount or aggregate of the amount transmitted by the customer in an economic year that is more than seven lakh rupees and where the amount being remitted is not for the purpose of purchasing an overseas vacation program package.

TCS will be assessed at a rate of 0.5 per cent on any amount of remittance that is greater than INR 7 lakhs if it is determined that the money was sent back to India for the purpose of obtaining a loan to pay for educational expenses from any of the specified financial institutions in India (as described in section 80E of the Income-tax Act of 1961).

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In addition, if the person making the transfer does not provide their PAN, the government will collect tax at a rate of ten per cent in situations in which the money is being sent for a purpose other than the purchase of a package for an overseas travel program and at a rate of one per cent in scenarios in which the money is being sent for the purpose of pursuing education with the help of a loan.

Who is Exempted From the TCS collection?

The following circumstances exclude the vendor of an international travel program package from the need to collect TCS:

  • If the buyer is required to withhold tax and make a TDS payment under any other provision of this Act and has already withheld the required amount;
  • If the buyer is a government entity such as the Central Government, a State Government, an Embassy, a High Commission, a Legation, a Commission, a Consulate, the Trade Representation of a Foreign State, a Local Authority, etc.


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