When people send money abroad for remittances, travel expenditures, asset purchases, shopping, and investments, they are subject to TCS, or Tax Collected at Source.
Such transfers are made possible under the LRS (Liberalised Remittance Scheme). The TCS rate for the majority of remittances (apart from those for medical and educational expenses) increased from 5% to 20% in the 2023 Union Budget.
This modification aims to increase tax income and promote domestic spending. While education and medical remittances remain at 5% for sums over ₹7 lakhs, the new 20% TCS rate will be in force as of 1 October 2023.
If remittance above Rs 7 lakh spent for foreign education is through a loan obtained from an approved financial institution under Section 80E of the Income-tax Act, 1961, it will attract TCS at 0.5 per cent. Remittances beyond Rs 7 lakh spent for educational purposes not obtained through a loan, will attract a TCS of 5 per cent.
When submitting income tax returns, taxpayers can claim TCS deductions as refunds or credits, which can be used to reduce their tax obligations. Effectively handling tax liabilities in cross-border transactions requires a thorough understanding of TCS W.E.F Oct 1st 2023, there will be a revised Tax Collected at Source (TCS) regime in place. Forex transactions below Rs 7 lakh in a financial year are not subject to Tax Collected at Source (TCS). For Forex transactions above Rs 7 lakhs in a financial year, TCS of up to 20% will apply.
ow Forex Transactions Will Be Taxed From Oct 1, 2023
| Earlier and new TCS rates are summarised as under: | |||
|---|---|---|---|
| Nature of payment | Earlier rate before Finance Act, 2023 | New rate wef 1st October 2023 | Change |
| LRS for education financed by loan | Nil upto Rs 7
lakh 0.5% above Rs 7 Lakh |
Nil upto Rs 7
lakh 0.5% above Rs 7 Lakh |
No Change |
| LRS for Medical treatment/ education (other than financed by loan) | Nil upto Rs 7
lakh 5% above Rs 7 Lakh |
Nil upto Rs 7
lakh 5% above Rs 7 Lakh |
No change |
| LRS for other purposes | Nil upto Rs 7 lakh
5% above Rs 7 Lakh |
NNil upto Rs 7 lakh
20% above Rs 7 Lakh |
No Change
Increased by 15% |
| Purchase of Overseas tour program package | 5% (without threshold) | 5% till Rs 7 Lakh, 20% thereafter | No change upto 7 Lacs; increased by 15% above 7 lacs |
Do remember that TCS is not an additional tax. It is similar to TDS or tax deducted at source. You can claim a refund for TCS while filing your income tax return. To get your money back, you have to wait till the next financial year when your income tax refund will be processed.
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