New TCS rule from next month: In the Union Budget 2023, the tax collection at source (TCS) for foreign remittances under the Liberalised Remittance Scheme (LRS) was raised from 5% to 20%. This will be applicable to international travel, sending money abroad, and other remittances. The higher rate of TCS will not apply to education expenses incurred abroad or for medical reasons. This new rule will come into effect from next month, October 1, 2023.
International travel plans will get costlier and TCS on overseas tour packages will now attract a higher TCS rate of 20% instead of the previous rate of 5% if the total spend is above ₹7 lakh. However, the 5% rate will continue to prevail if the total cost of the package is under ₹7 lakh.
“It has been clarified by the government that the purchase of international travel tickets and hotel bookings on a standalone basis will not qualify as an Overseas Tour Program Package,” said Archit Gupta, Founder and CEO, of Clear
The government has also clarified that payments made overseas using one’s credit card will remain outside the purview of TCS for the time being. Other payment modes, like debit cards, cash, and wire transfers will continue to attract TCS at the applicable rates, Gupta added.
How to minimise TCS burden
One can plan their outward remittances to minimize the TCS burden. With an example, Gupta explained that if a person has multiple outward remittances planned for the year for foreign travel, investment, education, and or medical purposes, then the first spend can be towards transactions attracting a higher rate of TCS viz, travel and investment and thereafter, remittance can be made towards education and medical purposes which attract a lower rate of TCS.
How you can reduce TCS on your foreign trip?
“This change means that limiting your total expenses to ₹7 lakhs would be a wise move to optimize your trip expenses,” Abhishek Soni CEO and Co-founder Tax2win.
Here are some tips to help you save on your foreign travels as suggested by Tax2win CEO
Avoid Packaging of the Trip: Instead of opting for a bundled tour package, travelers can consider making standalone bookings for their overseas accommodation, travel tickets, and other relevant expenses before September 30, advised Soni.
Buy Forex in Advance: It's advisable to refrain from last-minute currency exchange and, instead, purchase Forex in advance. “Until September 30, forex orders over ₹7 lakh will be subject to only 5 percent tax,” said Soni.
Use Credit Cards with Caution: The government has also clarified that payments made overseas using one’s credit card will remain outside the purview of TCS for the time being. As per Tax2win CEO, this amendment might impact your next planned trip. Stay updated and plan accordingly.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
First Published:
25 Sep 2023, 07:20 AM IST
FAQs
You don't have to pay TCS on money transferred overseas if the amount is below INR 7 lakh, so keep the transfer amount below INR 7 lakh to avoid 20% TCS On Foreign Remittances . Remember that to avoid paying TCS this way, the total amount you send in a financial year should be below INR 7 lakh.
What is the TCS for foreign transactions? ›
The TCS has now gone up to 20% from 5% for all remittances except those concerning education or medical treatment. Remittance is any money you send abroad. You'll still be taxed at 5% for amounts exceeding ₹7 lakhs for education and medical treatment in a foreign land.
What is the tcs? ›
Tax Collected at Source (TCS) is a tax payable by a seller which he collects from the buyer at the time of sale of goods. Section 206 of the Income Tax Act mentions the list of goods on which the seller should collect tax from buyers.
What is the TCS rate? ›
TCS (Tax Collected at Source) Rates in India for FY 2023-24 (AY 2024-25)
| Type of Goods | Tax % |
|---|
| Timber wood when not collected from a forest that has been leased, but any other mode | 2.50% |
| A forest product other than tendu leaves and timber | 2.00% |
| Scrap | 1.00% |
| Toll Plaza, Parking lot, Quarrying and Mining | 2.00% |
5 more rowsHere's how you can navigate through it:
- File Your Income Tax Return: Include the TCS amount in your tax return. ...
- Ensure Accurate TCS Credits: Verify that all TCS amounts are reflected correctly in your Form 26AS.
- Wait for Processing: The Income Tax Department will process your return and ascertain the refund amount.
Non-Resident Indians (NRIs) can repatriate a maximum of $1 million without paying any tax on money transfers from India to the USA. The reason is, as per Section 206C(1G) of the Income Tax Act, there is no applicable TCS when NRIs transfer money from their NRO to their NRE account.
How much foreign remittance is tax free in India? ›
Tax Implications on Inward Remittances to India
If an individual receives a remittance as a gift from a relative, it is exempt from tax. However, if the gift amount exceeds ₹50,000 and is not from a relative, the entire amount becomes taxable.
What is the limit of foreign remittances in India? ›
How much can you transfer abroad annually? The Reserve Bank of India (RBI) has set a financial year limit of $2,50,000 (INR 2.08 Cr) for foreign remittances, which applies mainly to personal remittances. For international business- payments, the volume of transactions generally goes above and beyond $250,000 annually.
What is the limit of TCS? ›
According to Section 206C(1H), a seller will have to deduct TCS on sale of goods if the value of the sale goes above Rs 50,00,000 in a certain fiscal year.
Is TCS on foreign remittance refundable? ›
TCS on foreign remittance – compliance and reporting
The TCS amount will then be documented on your Form 26AS – an annual statement summarising taxes deducted. Accurately reporting TCS on your income tax return is crucial to avoid penalties. If TCS exceeds your total tax dues, you can claim a refund for the surplus.
Tax collected at source (TCS) is the tax collected by the seller from the buyer on sale so that it can be deposited with the tax authorities. Section 206C of the Income-tax Act governs the goods on which the seller has to collect tax from the buyers.
What does TCS do with example? ›
TCS is well known in the e-governance, banking and financial services, telecommunications, education and healthcare markets. TCS is a major player in the IT space. It currently has over 600,000 employees and a market cap of over $200 billion.
How is TCS calculated? ›
Calculation of TCS and effective dates
A seller is required to collect tax at source at 0.1% on receipt of consideration of value exceeding Rs. 50 lakh in a financial year from the buyer. (This rate is reduced to 0.075% till 31st March 2021 due to COVID-19).
What is TCS fee? ›
Tax Collected at Source (TCS): Payment, Exemption & Rates
In certain payments, the person making the payment must deduct tax at the source at a specific rate. Tax is collected at source by a seller from buyers when selling some prescribed goods. The seller is called the collector, and the buyer the collectee.
What is the discount of TCS? ›
We get at least 5 % discount on Tata Products like Titan, Fast Track etc. All you have to do is produce your TCS identity card. Apart from Tata Products we get discount coupons up to 35% on Jabong, Pizza Hut, Food Panda, Lenskart etc. The discount offers vary from month to month.
How much money can be transferred from the USA to India without tax? ›
Can you transfer money to India without any tax? Yes, you can transfer funds from the USA to India without any tax up to a certain limit. For the taxation year 2023, you can transfer $17,000 per person domestically or abroad (including India) without attracting any tax.
How much money can my parents send from India to the USA as a gift? ›
How much money can be sent as a gift to the USA from India? The Liberalised Remittance Scheme (LRS) is open to all Indian resident individuals, enabling them to send a maximum of $250,000 per fiscal year.
Will I be taxed if I receive money from overseas? ›
Recipients of foreign inheritances typically don't have a tax liability in the United States. And, if you're sending your own money from a foreign bank account to a domestic one, you won't have to pay taxes on the transfer.
Do I have to pay tax in India if I receive money from abroad? ›
Tax Implications on Inward Remittances to India
If an individual receives a remittance as a gift from a relative, it is exempt from tax. However, if the gift amount exceeds ₹50,000 and is not from a relative, the entire amount becomes taxable.
