RBI Tax Collection at Source

Hi Niyo Community Members,

I have received an email from DCB about “RBI Tax Collection at Source” basically from 1st October, 2020, all foreign remittance transactions including debit card transactions under Liberalised Remittance Scheme (LRS) will be subject to Tax Collection at Source (TCS) under Section 206C of the Income Tax Act, 1961.

Since then on every foreign transaction, Niyo started charging 5% tax on each transaction although the spends on the Global card is very much under 7Lakhs per financial year limit.

So why I am being charged for it? Or it would be credited back in few days?

What are your thoughts on this?

Hi @maxudit,

What I understood is new tax rule is applicable only for transactions above ₹7 Lakhs. (if you already crossed ₹7L limit in an year, then 5% tax will deduct irrespective of transaction amount)

If 5% tax is deducted from you for transactions under ₹7 Lakhs, then I’m curious to know an explanation from Niyo.

yes, my total transactions for this financial year is pretty much under 7Lakhs, actually under half of this limit to be precise still Niyo/DCB deducting 5% tax on all my transactions starting 1st Oct, 2020. Really want to know the reason behind this.

Yes. What Niyo is doing is not according to the finance act 2020 and is legally challengable in my opinion or unfair trade practices. Niyo must clarify on this. The act has categorically asked not to collect the sum if the threshold amount has not reached.

Yup, happened with me as well. I haven’t crossed the threshold still 5% tax has been deducted. Also, I would like to note - I receive inward remittance for providing my services. Would the inward remittance be also counted in the 7 Lakh threshold?

Hey there! Please note that if the amount doesn’t exceed 7 lacs in the financial year, then whatever TCS that is getting deducted for the International transactions, will be reversed back to your account in 12 days from the date of the transaction. LK

Hi @Niyo_Mod,

This makes sense!

Though why 5% is deducting for transactions under ₹7L? I don’t think it’s easy to track refund for each transaction everytime.

Hey Alan! This is as per the guidelines shared by DCB. Different banks have implemented this new policy shared by RBI in different way. As long as your International limit for the financial year has not been exceeded for more than 7 lacs, the TCS charged will keep getting refunded back to your account in 12 days from the date of the transaction. LK

@Niyo_Mod Any information on whether inward remittances are counted in this 7L limit or not?
And how would one request for 26AS form from DCB for each financial year which can then be used while filing the ITR?

Hi @Niyo_Mod,

I got your point. If Niyo can forward customer’s feedback regarding this to DCB, it would be good. As I told earlier, this is kinda complex procedure for tracking refunds for all the transactions.

When government is clear on the terms, why DCB making it so complex! :thinking:

Hey Alan! We will certainly ensure that this is passed on to DCB. Thank you! LK

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I have raised this concern to the customer care as well, in my case i made 3 transactions on the 30th and the TCS was debited strangely for 2 of them on the 1st and for the third one on 2nd. Additionally there are debit and credit transactions after that for same amount for which there is no tagging or explanation. It is very difficult to track this. Just as in the case of Forex Adjustments, you have the tagging of the transaction as “Fx Adjustment”, similarly these should be tagged as “TCS Debit” and “TCS Refund”. I still did not get any reply from the customer care as to why TCS was debited for transactions done on 30th when the RBI instructions clearly state that this applies only for transactions from 1st on wards.

Since this 7 Lakh limit is for a financial year and DCB already has a record of the previous transactions, I am sure they should be able to deduce at the time of the new transactions of the amount will cross the 7 Lakh and only in this case the TCS amount should be deduced, not for each and every transaction. This will make tracking very complicated for customers.

Indeed, it is quite poorly structured on DCB or Niyo or whatever.

Some of my 5% deductions happening in name of “transaction fees” and some of them in name of original “merchant name” where the transaction happened.

Secondly, I just noticed today and I got 5% tax refund on one of my transaction which happened on 5th October but still haven’t received any TCS refund on transactions happened on 30th September and 1st October.

#Niyo, This needs to be fixed otherwise you will end up losing a lot of customers.

Also the strange fact is, if an order is cancelled, then only the original transaction amount will be refunded. The 5% TCS won’t get back. It can be claimed back only by filing income tax returns!! Seriously??

What a ridiculous method DCB has implemented. Soon they can face drastic decrease in customer base, in my opinion!!

@Alan_Abraham, yes. Imagine spending $1000 on an electronic device and you returned it or the order gets cancelled. In both cases your 5% of the money would hang in the middle till the time you claim back in income tax returns. This is seriously, bad bad bad.

As I said earlier it’s not according to the finance act. At one place DCB says TCS will be refunded in 12 days if gross does not cross 7 lacs and in case of cancellation it says TCS cannot be refunded if the transaction is not reversed the same day.
AFAIK TDS and TCS are broadly of same nature and can be claimed/adjusted with tax while filling ITR.
But here they are collecting 5% in the name of TCS and later refunding it without paying any interest is unfair trade practice. This should certainly be addressed by Niyo. Since Niyo claims to be a transparent company it should convince it’s user that what DCB is practicing here is total legit.

Hi @maxudit

Instead of reducing the burden of customers due to ll new TCS rule, DCB is working hard to make it more burden to their customers. What a service!!!

Niyo should take this issue seriously and discard this procedure (Deducting 5% TCS for transactions below ₹7L & Refund Claim by filing ITR for cancelled transactions) atleast for Niyo customers.

The rule is supposed to apply for all transactions from 1st Oct on wards. I have raised a complaint asking them why they have deducted TCS for the transactions on 30th. In my case as well this has happened. Also as you mentioned the TCS transactions in my case has the same name as the actual transaction. Two entries with the same name is there in the transaction history. For some there is a debit and again a credit on a different day and I am not able to understand to which original transaction that refers to. This is a pathetic implementation of the rule. Also since they are already maintaining the transactions of the customers real time they should be able to find out if a particular transaction triggered is exceeding the 7Lakh limit or not. Did not expect this from a technology based financial solution.

So 12 days has passed and as per Niyo and DCB, 5% TCS should be refunded back to the card account. Although, it haven’t in my case yet (30th Sep and 1st Oct transactions) Anyone got their TCS back? Just curios.