Taxation - Income TaxQuestion 5603 of 146
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7. Mr. Shivam, a resident individual, has made following payments to M/s ABC Ltd. to purchase overseas tour programme packages: (i) ` 4 lakhs on 18-05-2024 to visit New York, USA. (ii) ` 5 lakhs on 11-03-2025 to visit London, UK. Compute the amount of tax required to be collected u/s 206C(1G) by M/s ABC Ltd. assuming Mr. Shivam has furnished a valid PAN.

Options

AOn 18-05-2024: Nil, On 11-03-2025:` 10,000
BOn 18-05-2024: ` 20,000, On 11-03-2025: ` 1,00,000
COn 18-05-2024: ` 20,000, On 11-03-2025: ` 55,000
DOn 18-05-2024: Nil, On 11-03-2025: ` 40,000
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Correct Answer

Option COn 18-05-2024: ` 20,000, On 11-03-2025: ` 55,000

All Options:

  • AOn 18-05-2024: Nil, On 11-03-2025:` 10,000
  • BOn 18-05-2024: ` 20,000, On 11-03-2025: ` 1,00,000
  • COn 18-05-2024: ` 20,000, On 11-03-2025: ` 55,000
  • DOn 18-05-2024: Nil, On 11-03-2025: ` 40,000

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Detailed Solution & Explanation

To compute the amount of tax required to be collected at source (TCS) u/s 206C(1G) by M/s ABC Ltd. on the sale of overseas tour programme packages:

1. **TCS Provisions u/s 206C(1G) for Overseas Tour Packages:**
* For the sale of an overseas tour programme package, TCS is collected from the buyer.
* The rate of TCS is:
* **5%** of the package cost up to ₹ 7,00,000 in a financial year.
* **20%** of the package cost for any amount exceeding ₹ 7,00,000 in a financial year.
* Note: Unlike LRS transactions, there is no basic threshold exemption of ₹ 7,00,000 where TCS is Nil. The 5% rate applies from the first rupee.

2. **Calculation of TCS on First Payment (18-05-2024):**
* Amount = ₹ 4,00,000 (which is less than the ₹ 7,00,000 limit).
* TCS Rate = 5%.
* TCS Amount = 5\displaystyle 5\\% \\times ₹ 4,00,000 = ₹ 20,000.

3. **Calculation of TCS on Second Payment (11-03-2025):**
* Amount = ₹ 5,00,000.
* Cumulative payment in the financial year = 4,00,000+5,00,000=9,00,000\displaystyle ₹ 4,00,000 + ₹ 5,00,000 = ₹ 9,00,000.
* The portion of the second payment that falls within the ₹ 7,00,000 limit is:
7,00,0004,00,000=3,00,000₹ 7,00,000 - ₹ 4,00,000 = ₹ 3,00,000
* TCS on this portion @ 5% = 5\displaystyle 5\\% \\times ₹ 3,00,000 = ₹ 15,000.
* The portion of the second payment that exceeds the ₹ 7,00,000 limit is:
9,00,0007,00,000=2,00,000₹ 9,00,000 - ₹ 7,00,000 = ₹ 2,00,000
* TCS on this portion @ 20% = 20\displaystyle 20\\% \\times ₹ 2,00,000 = ₹ 40,000.
* Total TCS on the second payment = 15,000+40,000=55,000\displaystyle ₹ 15,000 + ₹ 40,000 = ₹ 55,000.

4. **Summary:**
* TCS on 18-05-2024 = ₹ 20,000.
* TCS on 11-03-2025 = ₹ 55,000.

Hence, **Option C** is the correct answer.

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