Government set to link TDS with TCS: Chief Economic Advisor
The 20 percent levy on international credit card spending will come into effect from 1 July
In a move that will help ensure the cash flows of individual taxpayers are not impacted, the Central government is attempting to link Tax Collected at Source (TCS) for payments made by individuals with tax deducted from their income sources.
Importantly, from 1 July, the government is set to impose 20 percent TCS on certain international spends. TCS is generally the tax collected by a seller at the time of sale of goods or services, while Tax Deducted at Source (TDS) is the amount levied as tax by the government.
According to V Anantha Nageswaran, the Chief Economic Advisor to the Government of India, this means that the bulk of the transactions made by most people, will not be covered under 20 percent TCS. He added, “The government is also attempting to link the TCS with TDS, so that if TCS payments are made, they reflect a lower TDS. This is to ensure that people are not affected from the perspective of a cash flow.”
Speaking at the Confederation of Indian Industry event recently, Nageswaran explained that it will be a huge relief to those concerned about finding TCS apart from TDS.
However, facing a backlash from many, theMinistry of Finance exempted up to Rs.7 lakh spent from the TCS ambit, providing relief to the small taxpayers.
The Chief Economic Advisor said that one point of view was all that one needed was to levy 1 percent or 5 percent so that it could be tracked. He added, however, there are people who are happy to stay out of the tax net by even paying 1 percent or 5 percent. So, there had to be a deterrent effect.
Nageswaran pointed out that the data available with the government pointed out that this mechanism was abused by a small set of people, but the volumes involved were fairly substantial.
Currently, overseas medical treatment and education expenses up to Rs.7 lakh a year is exempt from TCS. Only a 5 percent levy is charged on expenses exceeding Rs.7 lakh. For people availing of education loans, the rate of TCS is 0.5 percent.