Under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI), you can remit up to $250,000 in a financial year. Starting from October 1, 2023, all overseas outward remittances, except for medical and educational purposes, over a threshold limit of Rs 7 lakh in a financial year will attract a TCS of 20%.
How much TCS will apply on foreign remittances for education from October 1, 2023?
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Under LRS, there will be no TCS on foreign remittances below Rs 7 lakh spent for educational expenses. If remittance above Rs 7 lakh spent for foreign education is through a loan obtained from an approved financial institution, it will attract TCS at 0.5%. Remittances above Rs 7 lakh spent for educational purposes not obtained through a loan, will attract a TCS of 5%.
New TCS rates on medical expenses from October 1, 2023
Any outward remittance for medical treatment will attract TCS at 5% if the threshold crosses Rs 7 lakh, from October 1, 2023.
Do remember that any remittance for travel and ancillary expenses related to education and medical treatment will attract TCS at the same rate applicable to remittances for education and medical treatment, according to the Ministry of Finance.
Suppose you are sending money for your child studying abroad to meet her monthly expenses. Though it is not directly linked to her education expense, such as college fee or hostel fee, you can still show that the money as being remitted for her. In such cases, TCS will attract the same rate applicable on education expenses.
How much TCS will apply on overseas tour packages from October 1, 2023?
There is no relief from TCS on the purchase of overseas tour packages even when the amount is below Rs 7 lakh. On the purchase of overseas tour packages of up to Rs 7 lakh in a financial year, a TCS of 5% will apply from October 1, 2023. Beyond Rs 7 lakh, TCS will be applicable at 20% from next month.New TCS Rates from October 1, 2023
|Nature of payment||TCS rates until September 30, 2023||New TCS rates from October 1, 2023|
|LRS for education financed by loan||Nil up to Rs 7 lakh||Nil up to Rs 7 lakh|
|0.5% above Rs 7 Lakh||0.5% above Rs 7 Lakh|
|LRS for medical treatment/education (other than financed by loan)||Nil up to Rs 7 Lakh||Nil up to Rs 7 Lakh|
|5% above Rs 7 Lakh||5% above Rs 7 Lakh|
|LRS for other purposes such overseas investments or gifts||Nil up to Rs 7 Lakh||Nil up to Rs 7 Lakh|
|5% above Rs 7 Lakh||20% above Rs 7 Lakh|
|Purchase of Overseas tour program package||5% (without threshold)||5% till Rs 7 Lakh, 20% thereafter|
Source: Ministry of Finance
How much TCS will apply on overseas payments for investments such as buying stocks, and cryptos from October 1, 2023?
Foreign remittances for other purposes such as overseas investment will attract a TCS at 20% over a threshold limit of Rs 7 lakh in a financial year. So if you are investing more than Rs 7 lakh in foreign stocks, mutual funds, cryptocurrency, or property in a financial year, be ready to shell out 20% TCS on amounts above Rs 7 lakh in a given financial year.
However, if you are investing in domestic mutual fund schemes that have exposure to foreign stocks, it will not be treated as remittance under LRS and will not attract TCS.
Aggregate amount of outflow that will be counted for TCS application
Do note that the threshold of Rs 7 lakh for LRS is a combined threshold for the applicability of the TCS on LRS irrespective of the purpose of the remittance. There will be TCS if the total outward remittances are less than Rs 7 lakh in a financial year. If the threshold of Rs 7 lakh is crossed, then TCS will attract at different rates, depending on the purpose.
Payments by debit card, credit card, and forex cards: What is the new TCS rule?
Do note that payments by credit cards do not come under the ambit of LRS. Hence, there will be no TCS on credit card transactions. However, payments by debit cards or forex cards come under LRS. The threshold of Rs 7 lakh applies here as well. If you spend Rs 7 lakh using a debit or forex card you have to pay TCS at 20% from October 1, 2023.
There are different TCS rates on LRS for the first six months and the next six months of the financial year 2023-24. Do you get two separate thresholds of Rs 7 lakh under TCS?
No. The threshold of Rs 7 lakh, for the TCS to become applicable on LRS, applies for the full financial year, the Ministry of Finance clarified earlier. If this threshold has already been exhausted, then all subsequent remittances under LRS, whether in the first half or the second half, will be liable for TCS at the applicable rate.
How TCS threshold will work if you use different sources of forex payments
Suppose you are using multiple authorised dealers or banks to remit in a year. Will the threshold of Rs 7 lakh, for TCS to become applicable on LRS, apply separately for each remittance through different authorised dealers?
The threshold of Rs 7 lakh for LRS is qua remitter and not qua authorised dealer, the Ministry of Finance said earlier. Suppose, you conduct LRS transactions through multiple authorised dealers or banks or international debit cards in a year. Then the threshold of Rs 7 lakh in a financial year will be calculated based on the total amount spent across all authorised dealers/banks. It will not be assessed independently for each authorised dealer or bank.
There is a threshold of Rs 7 lakh for remittance under LRS for TCS to become applicable while there is another threshold of Rs 7 lakh for purchase of overseas tour program package. Whether these two thresholds apply independently?
Yes, these two thresholds apply independently. For LRS, the threshold of Rs 7 lakh applies to make TCS applicable. For the purchase of an overseas tour program package, the threshold of Rs 7 lakh applies to determine the applicable TCS rate as 5% or 20%.
Do remember that TCS is not a tax by itself. TCS is shown in Form 26AS as a tax credit, which can be claimed against the tax payable while filing an income tax refund (ITR). Individuals can also offset it while filing advance taxes. For those who are not able to offset this amount against taxes payable or any other form, it will be available as a refund after filing ITR.