TCS @ 20 % from 01-10-2023 on foreign remittances

Key features of Tax Collection at Source @ 20 percentage from 01-10-2023 on foreign remittances:

1.    Exemption threshold limit of Seven lakhs per FY per individual shall apply to remittance under liberalized remittance scheme. No threshold exemption for foreign tour packages

2.   Tax collection at source Rates for LRS: On amount exceeding INR Seven lakhs, Tax collection at source shall be collected :

i.   @ 0.5 percentage on remittance for education financed by loan taken from financial institution

ii.   @ 5 percent on remittance for education not financed by financial institution.

Note : Remittance for education shall include tickets for tuition fee and study abroad fee to educational institute and other day to day expenses under codes S0305/S1107

iii.   @ 5 percentage on remittance for medical treatment (including ticket of patient and his attendant and medical expenses and day to day expenses for medical treatment) made under Code S0304/ S 1108.

iv.  @ 20 percent on any other purpose for remittance under liberalized remittance scheme.

Liberalized Remittance Scheme:

3.   Liberalized Remittance Scheme: Remittances by individuals up to $ 25k for the below object are covered under liberalized remittance scheme attracting Tax Collection at Source on remittance exceeding INR Seven lakhs:

·        Donation or Gift.

·        Expenses towards the Going foreign for employment

·        Expenses towards the Private visits to any country (except Nepal and Bhutan)

·        Expenses towards the maintenance of close relatives abroad

·        Expenses towards the Emigration

·        Expenses in connection with medical treatment abroad

·        Studies Abroad

·        Expenses towards the Travel for business, or attending a conference or specialised training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for check-up or medical treatment.

·        Any other Current A/c transaction

Current Account Transactions

4.    Current A/c transactions means transaction other than capital account transactions & include

·   payments due as interest on loans and as net income from investments,

·   payments due in connection with foreign trade, other current business, services, and short-term banking and credit facilities in the ordinary course of business

·   expenses towards in connection with foreign travel, education and medical care of parents, spouse and children. and

·  remittances towards for living expenses of parents, spouse and children residing abroad,

5.   Tax Collection at Source on expenditure via  international credit card while being overseas though has also been brought under liberalized remittance scheme by omissions of Foreign Exchange Management (Current Account Transactions) Rules, 2000 under Rule 7 However Tax Collection At Source has been suspended till further orders by guidelines issued under Circular 10/2023 dated 30-06-2023. Tax Collection At Source on expenditure via ATM or international debit card is covered by liberalized remittance scheme and shall attract Tax Collection At Source.

6.   Expenses of business visit of employee are borne by entity. Any kind of these expenses shall be treated outside liberalized remittance scheme & may be allowed without threshold limit & shall not attract Tax Collection At Source

6A. Finance Ministry issued order: Big relief to credit card expenses Finance Ministry say that spending abroad via International Credit Cards will not come under the LRS Scheme. So there will be no deduction of tax on it.

6B. It’s important to understand the distinctions between payment methods, though, as LRS requirements do apply to both debit and credit cards. Depending on the particular goal of the transaction, these cards may or may not be charged to TCS.

Tax Collection At Source @ 5%

7.  Tax Collection At Source @ 5% shall apply on Foreign tour packages up to INR Seven lakhs & Tax Collection At Source @ 20 percent shall apply on foreign tour packages above INR 20 lakhs. Foreign tour package should expenditure on any two of followings:

·   Hotel accommodation (with or without food)/boarding/lodging

·   Foreign travel ticket

·   any other expense of the same nature or in relation thereto.

What is Tax Collection At Source applicability of threshold limit of Seven lakhs :

·        The Seven Lakhs threshold limit will be applied to all foreign remittances under the liberalised remittance programme for medical treatment, education, or any other specific goal, and it won’t be applied to each reason separately. However, remittances under the liberalised remittance system cannot be combined with the seven lakhs threshold limit in the case of foreign travel packages.

·    The Seven Lakhs Over threshold Limit for the Liberalised Remittance Scheme will be applicable for the entire Financial Year 2023–2024 and not just for the period after January–07–23 or January–10, 2023.

· Basic Benchmark seven lakhs Rs limit applies to all remitters, not just AD. Until the Reserve Bank of India creates a new system, undertakings in this regard may be acquired from remitters by AD for remittances via other dealers. Key note is that foreign remitter shall be responsible for false undertaking provided by him if any

9.   Where purchase of foreign tour package is covered by liberalized remittance scheme also, Tax Collection At Source shall apply treating the same as foreign tour package & not remittance under liberalized remittance scheme.

10. Tax Collection At Source on foreign remittance shall not apply where tax deducted at source is applicable

11.  Tax Collection At Source on foreign remittance shall not apply to non-resident who does not have make any kind of establishment in India.

TDS & TCS Rate chart for FY 2024-25

Comprehensive study about TDS & TCS chapter

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