Whether its foreign fund transfers or GST e-voicing, a slew of changes in tax regimen came into effect on October 1.

A slew of changes to direct and indirect taxes announced by the government earlier are set come into effect from October 1. New tax rules pertain to foreign remittances, GST e-voicing, import duty on TV parts, TCS on sale of goods, TDS on e-commerce.

The new provisions will help the government gather data on cross-border fund flows and transactions. Here are changes that kick in from October 1

Foreign remittances

If you intend to buy a foreign tour package in the near future, please note that a 5% Tax Collected at Source (TCS) will be deducted, subject to conditions. However, all other foreign remittances above Rs 7 lakh will be subject to this 5% tax beginning October 1. This will not be applicable to those transactions where the tax has already been deducted at source.

However, the fees of foreign colleges paid through loans by students over and above Rs 7 lakh will be taxed at 0.5% because most pupils fund their foreign education with a loan.

It is to be that under the Reserve Bank of India’s (RBI’s) liberalised scheme for remittances or foreign transfers allows for a maximum amount of $250,000 to be sent abroad per individual. The government introduced the provision to collect tax on foreign remittances in the Finance Act 2020, albeit with some conditions, in a notification on March 27, 2020, and it will come into effect from October 1.

Under the RBI’s Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to $250,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. This limit was earlier just $25,000 which has been revised in stages consistent with prevailing macro and micro economic conditions, according to RBI statement.  

The purpose behind TCS is to identify cases where the declared income of an individual is not commensurate with remittance amounts.

Relief given in GST e-voicing

E-voicing has been made mandatory from October 1 for those companies which have Rs 500 crore in sale. Such companies will be required to submit sale invoices in a GSTN portal of the government. The move is aimed at automating data-entry work and reduce errors and mismatches. It is applicable for companies on business-o-business transactions.

However, the Ministry of Finance gave some relief to corporates on this front on October 1. It has been reported that even after more than 9 months of the first notification in this regard, some of these taxpayers having an aggregate turnover of Rs. 500 crore and above are still not ready. Accordingly, as the last chance, in the initial phase of implementation of e-invoice, it has been decided that the invoices issued by such taxpayers during October 2020 without following the manner prescribed under rule 48(4),  shall be deemed to be valid and the penalty leviable under section 122 of the CGST Act, 2017, for such non-adherence to provisions, shall stand waived if the Invoice Reference Number (IRN) for such invoices is obtained from the Invoice Reference Portal (IRP) within 30 days of the date of invoice, the Finance Ministry said.      

Import duty on TV components

Open cell panels, a crucial component in the manufacture of television sets will be taxed at 5% import duty. The government rejected requests by industry players to extend the exemption on the component after the relief was given for one year.

TCS on sale of goods

Seller having Rs 10 crore revenues in the previous financial year will need to collect 0.1% tax from the buyer if the sale consideration exceeds Rs 50 lakh or if aggregate sale value exceeded Rs 50 lakh in any previous year.

TDS on e-commerce

The Finance Act, 2020 inserted a new section 194-O in the Income-tax Act 1961 which mandates that with effect from October 1, 2020, an e-commerce operator shall deduct income tax at the rate of 1 per cent of the gross amount of sale of goods or provision of service or both, facilitated through its digital or electronic facility or platform.