Finance Minister Nirmala Sitharaman in her Budget Speech 2023-24 announced a slew of measures regarding taxes. She also announced changes in policy on tax collected at source (TCS) on foreign remittance under LRS. The Budget raised TCS rates on LRS and foreign tour packages to 20 per cent. The new rate will come into effect from October 1. Here’s all you need to know:
Currently, funds transferred overseas under the Reserve Bank’s LRS attract 5 per cent Tax Collection at Source (TCS) on amounts exceeding Rs 7 lakh. The TCS rate will go up to 20 per cent from October 1.
What Is The RBI’s LRS or Liberalised Remittance Scheme?
Under the RBI’s Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to $2,50,000 (roughly Rs 2.08 crore) per financial year (April-March) for any permissible current or capital account transaction or a combination of both.
The scheme was introduced on February 4, 2004, with a limit of $25,000.
Changes Announced In Budget 2023
The Budget 2023-24 had raised TCS rates on LRS and foreign tour packages from 5 per cent to 20 per cent, effective July 1.
LRS spending above Rs 7 lakh would attract 20 per cent TCS from October 1.
On the purchase of overseas tour programme packages, no TCS will be applicable on payments up to Rs 7 lakh. However, above Rs 7 lakh, 20 per cent would be levied from October 1. Earlier, there was a TCS of 5 per cent without any threshold.
On medical treatment and education, no TCS will be levied till Rs 7 lakh spending. However, a 5 per cent TCS will be applicable in case of spends above that. Earlier also, the rates were the same.
On overseas education, a lower TCS rate of 0.5 per cent would be levied above the Rs 7 lakh threshold.
On LRS for other purposes, no TCS will be applicable till Rs 7 lakh and there will be a 20 per cent TCS thereafter. Earlier, there was no TCS till Rs 7 lakh, and there was a 5 per cent above Rs 7 lakh.
However, transactions through international credit cards while being overseas would not be counted as LRS and hence would not be subject to TCS. “No TCS shall be applicable on expenditure through international credit card while being overseas,” it has said.
The latest TCS rules, which are now going to be rolled out from October 1, were to be implemented from July 1 earlier. The implementation was postponed by the government to give financial institutions more time for the implementation of the revised TCS rates and for the inclusion of credit card payments in LRS.
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