TCS @ 20% from 01-10-2023 on Foreign Remittances: Important features
1. Exemption threshold limit of 7 lacs per financial year per individual shall apply to remittance under liberalized remittance scheme (LRS). No threshold exemption for overseas tour packages
2. TCS Rates for LRS: On amount exceeding Rs. 7 lacs, TCS shall be collected :
i. @ 0.5% on remittance for education financed by loan taken from financial institution
ii. @ 5% on remittance for education not financed by financial institution.
Note : Remittance for education shall include tickets for study abroad, tuition fee and other fee to educational institute and other day to day expenses under codes S0305 or under S1107
iii. @ 5% on remittance for medical treatment (including ticket of patient and his attendant and medical expenses and day to day expenses for medical treatment) made under Code S0304and Code S 1108.
iv. @ 20% on any other purpose for remittance under liberalized remittance scheme.
3. Liberalized Remittance Scheme: Remittances by individuals up to 250000 USD for following purposes are covered under liberalized remittance scheme attracting TCS on remittance exceeding Rs. 7 lacs:
(i) Private visits to any country (except Nepal and Bhutan)
(ii) Gift or donation.
(iii) Going abroad for employment
(iv) Emigration
(v) Maintenance of close relatives abroad
(vi) Travel for business, or attending a conference or specialised training or for meeting expenses for meeting medical expenses, or check-up abroad, or for accompanying as attendant to a patient going abroad for medical treatment / check-up.
(vii) Expenses in connection with medical treatment abroad
(viii) Studies Abroad
(ix) Any other Current account transaction
4. Current account transactions means transaction other than capital account transactions and include
i. payments due in connection with foreign trade, other current business, services, and short-term banking and credit facilities in the ordinary course of business
ii. payments due as interest on loans and as net income from investments,
iii. remittances for living expenses of parents, spouse and children residing abroad, and
iv. expenses in connection with foreign travel, education and medical care of parents, spouse and children.
5. TCS on expenditure through international credit card while being overseas though has also been brought under liberalized remittance scheme by omissions of Rule 7 of Foreign Exchange Management (Current Account Transactions) Rules, 2000 but TCS has been suspended till further orders by guidelines issued under Circular 10/2023 dated 30-06-2023. TCS on expenditure through international debit card/ATM is covered by LRS and shall attract TCS.
6. Expenses of business visit of employee are borne by entity. Such expenses shall be treated outside LRS and may be permitted without limit and shall not attract TCS
7. TCS @ 5% shall apply on overseas tour packages up to to Rs. 7 lacs and TCS @ 20% shall apply on overseas tour packages above Rs. 20 lacs. Overseas tour package should expenditure on any two of follwoings:
i. International travel ticket
ii. hotel accommodation (with or without food)/boarding/lodging
iii. any other expenditure of similar natre or in relation thereto.
8. Applicability of limit of 7 lacs :
i. Limit of 7 lacs shall apply in aggregate to all types of remittances under LRS for education or medical treatment or any other purpose and not to applied to every purpose individually. However for overseas tour packages limit of 7 lacs shall not be clubbed with LRS remittances.
ii. Limit of 7 lacs for LRS shall apply for complete FY 2023-24 and not only period post 01-07-23 or 01-10-2023
iii. Limit of Rs. 7 lacs is qua every remitter and not qua authorized dealer. Undertaking in this regard may be obtained from remitter by authorized dealer for remittances through other dealers, till RBI develops system. Remitter shall be responsible for false undertaking, if any
9. Where purchase of overseas tour package is covered by LRS also, TCS shall apply treating the same as overseas tour package and not remittance under LRS.
10. TCS on foreign remittance shall not apply to non resident who does not have establishment in India.
11. TCS on foreign remittance shall not apply where TDS is applicable