TCS Tax – Foreign Remittances, LRS

Tax Collection At Source On Liberalised Remittance Scheme, Foreign Travel Expenses

Section 206C(1G): Budget 2020 levied a new tax, in the form of TCS, on Liberalised Remittance Scheme transactions. TCS @5% shall be collected by the Authorised Dealer on foreign remittance transactions under Liberalised Remittance Scheme. This is applicable from October 1, 2020.

LRS Scheme: Under RBI LRS Scheme, a person can remit abroad an amount upto 2.50 Lakh USD in a financial year. This remittance can be made either for expenses (Donation, Gift, Travel Exps etc) or for investment outside India (towards bank account, shares, immovable property etc).

LRS TCS Monetary Limit of Rs 7 Lakh: TCSwill be applicable if total remittance in a financial year exceeds Rs 7 Lakh. Also, this limit is exempt limit for charging of TCS. Hence, even if remittance exceeds Rs 7 Lakh, TCS shall be collected on the amount exceeding Rs 7 Lakh. E.g if total remittance in a year is Rs 10 Lakh, then TCS shall be collected on Rs 3 Lakh i.e. 10 Lakh – 7 Lakh.

Relief For LRS Remittance For Education Purposes: TCS shall be collected @0.50% if LRS remittance is for education purposes. However, the source of money should be Loan taken from specified Financial Instituions as mentioned in section 80E of Income Tax Act (i.e. Banks, Govt Approved Financial Instituions). Limit of Rs 7 Lakh is same here as well.

Application of TCS: TCS so paid by the person while making remittance, can be applied towards tax payable at the time of filing ITR. If there is no tax payable then the same can be claimed as refund in the ITR.

TCS On Foreign Tour Packages: Similar to TCS on LRS remittances, 5% TCS has also been imposed on Foregin Tour Packages sale by the tour operators. Hence, on any sale of overseas tour package the tour seller shall collect 5% TCS also. And there is no threshold limit on Foreign Tour Package TCS.

FAQs – TCS on LRS Transactions, Foreign Tour Packages – Applicability and Impact on Non-Residents (NRIs, PIOs, OCIs)

Q: What is the impact of TCS on Non-Residents?

Non-residents, who used to receive money from Resident relatives in India, will face a less cash inflow as the TCS will be collected by the banks on the remittance amount. Hence, if a Resident Indian wishes to send a gift remittance or other remittance to his/her Non-Resident Relatives (NRI, Foreign Citizen) then out of the total cash flow available with Indian Resident there will be a Tax Collected at Source also by Bank. To that extent remittance amount will be reduced. Hence, less cash inflow to Non-Residents.

Q: Whether TCS is applicable on money being remitted by NRIs, Foreign Citizens from NRO account to NRE/Foreign Account?

No. Remittance by NRIs, PIOs, OCIs from their NRO account is covered under USD 1 Million Scheme. TCS u/s 206C(1G) is not applicable on USD 1 Million Scheme of NRIs, PIOs.

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