Govt. trying to link TCS on overseas spends to local TDS to smoothen cash flows: CEA
New Delhi, May 25, 2023
The 20% tax collection at source on international card spends as a deterrent aimed at people who are evading taxes of ‘substantial volumes’, says Chief Economic Advisor Nageswaran
The government is making attempts to link the tax collection at source (TCS) payments made by individuals to the taxes deducted from their income sources, so that the new 20% TCS norms for certain international spends don’t affect cash flows, Chief Economic Advisor (CEA) V. Anantha Nageswaran indicated on Thursday.
Responding to concerns about the 20% TCS levy on international credit card spends to be introduced from July 1, the CEA said that exempting transactions on debit and credit cards up to ₹7 lakh a year would mean “bulk of the transactions made by most of us will not be covered by the levy”.
“There are also attempts to link your TCS to the TDS deductions made, so if there are TCS payments made by you, it should reflect in a lower TDS as a method to make sure that you are not affected as far as cash flow is concerned. That will also provide a huge amount of relief for people who are concerned about this annoyance or irritation of seeing a TCS apart from your TDS,” Mr. Nageswaran said at the Confederation of Indian Industry’s annual session.
While the pass-through of TCS into TDS deductions will ensure ordinary taxpayers will not face problems, the CEA emphasised the need for a 20% levy as a deterrent effect for a large number of people who are evading taxes of “substantial volumes” through this mechanism, as per government data.
“One point of view is that you could have made it 1% or 5% if you wanted to track it. But there are people who are happy to stay out of the tax net even if 5% is deducted, so there has to be a deterrent effect at the same time without inconveniencing people, those who are paying the taxes,” he emphasised.