Direct Tax Alert - CBDT exempts taxpayers who are not resident of India from Section 206C(1G) of the IT Act

Finance Act, 2020 introduced section 206C(1G) in the Income-tax Act, 1961 (IT Act). As per this section, the following persons are required to collect tax at the source:

  • An authorized dealer who receives an amount for remittance out of India from a buyer under Liberalized Remittance Scheme.
  • Seller of an overseas tour program package 

Fifth Provision to section 206C(1G) of the IT Act grants powers to the Central Government to exempt certain class of person from the applicability of such provision. Recently, the CBDT has issued a Notification1 exempting certain individual taxpayers from section 206C(1G) of the IT Act. We, at BDO in India, have summarized this notification and provided our comments on the same hereunder:

Taxpayer exempted

An individual taxpayer who is not a resident of India in terms of section 6(1)2 and (1A)3 of the IT Act are exempted from the provisions of section 206C(1H) 

BDO COMMENTS

Exempting taxpayers who are not residents of India from the ambit of section 206C(1G) of the IT Act should bring cheers to the travel industry. As the Circular refers to ‘not a resident’ and not ‘non-resident’ within its ambit, it may be contended that this exemption should not be restricted to non-residents and may extend to not ordinarily resident individual taxpayers who meet the given criteria. Also, it may be noted that said Notification does not apply to HUF.

 

1 CBDT Notification No. 20/2022 dated 30 March 2022

2 As per section 6(1) of the IT Act, an individual taxpayer shall be considered as an Indian resident, if he:

  • is in India in that year for a period or periods amounting in all to one hundred and eighty-two days or more; or
  • having within the four years preceding that year bern in India for a period or periods amounting in all to three hundred and sixty-five days or more, is in India for a period or periods amounting in all to sixty days or more in that year.

3 As per section 6(1A) of the IT Act, an individual taxpayer, being a citizen of India, having total income, other than the income from foreign sources, exceeding fifteen lakh rupees during the previous year shall be deemed to be resident in India in that previous year, if he is not liable to tax in any other country or territory by reason of his domicile or residence or any other criteria of similar nature.

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