New TCS rate on foreign remittances: everything you need to know
Changes in TCS on Foreign Remittance to come into effect from 1 October 2023
The tax collection at source (TCS) rules have undergone some critical modifications recently from the finance ministry, which are expected to drastically change how many people conduct business abroad. Notably, the TCS rate adjustments that were originally set to go into effect in July have been moved to October 1, 2023.The Ministry has also clarified how TCS will be used for credit and debit card-facilitated foreign payments. Let us analyse these statements.
Increased TCS Rates from October 1, 2023
The TCS rate on overseas remittances made through the LRS would increase to 20% from the current 5% starting in October 2023. For some situations, there will be exceptions to this rule. For the purpose of maintaining compliance with the new regulatory framework, staying informed of these altered rates is essential.
Differential TCS Rates for Specific Transactions
There would be no TCS in effect for education-related costs less than Rs 7 lakhs. However, if financed by a loan allowed under section 80E of the income tax act of 1961, a lower TCS of 0.5% will apply to payments exceeding Rs 7 lakhs designated for education. However, there would be a 5% TCS applied to any educational transfers over Rs 7 lakh that are not financed by a loan. A TCS of 5% will also be applied on medical bills that exceed Rs 7 lakh. Beyond Rs. 7 lakhs, the TCS rate will be 20% on all subsequent outgoing transfers, with the exception of those for medical and educational purposes.
Earlier and New TCS rates are summarized as under:
Delay in TCS Implementation for International Card Payment
The roll-out of TCS for individual payments made with overseas debit and credit cards that exceed Rs. 7 lakhs have been postponed. Additionally, transactions made with international credit cards while travelling abroad will be exempt from the LRS and will not be charged TCS. This action intends to provide a sigh of comfort to consumers who use credit cards for foreign purchases.
We hope the above blog was helpful in enhancing your knowledge on the matter. In case of any queries feel free to get in touch with our team of experts.
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