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6 Changes To Tax Collection At Source On Foreign Remittance You Need To Know

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As per the Liberalised Remittances Scheme (LRS) in accordance with the RBI rules, an individual cam remit up to $2.5 lakh equivalent to Rs. 1.9 crore at a foreign exchange rate of Rs.76 per US dollar. And these foreign exchange transactions can be for meeting education or medical expenses as also for stock market investments.

6 Changes To TCS On Foreign Remittance You Need To Know
 

Now as per the announcements made in the Union budget for remittance up to Rs. 7 lakh or more in a financial year, tax collection at source (TCS) at the rate of 5% was to apply.

And for an amount remitted under LRS over Rs 7 lakh even if foreign exchange facility is opted through the rate of cash withdrawal at bank branches or for adding on to the forexcards, the rate of 5% would apply.

But these new income rules on foreign transactions will now will applied from October 1, 2020 instead of April 1, 2020. Further, there have been changes notified by some of the banks including HDFC and ICICI Bank. Here are the amendments put forth:

Tax collection at source amendments on foreign remittances:

1. Now the TCS rules shall become applicable from October 1, 2020

2. This TCS shall be applicable on amount remitted in excess of Rs. 7 lakh in a fiscal year and not on the total remittance under the LRS. So, given the condition if there is a remittance of Rs. 10 lakh under the LRS facility, 5% TCS shall be charged on Rs. 3 lakh and so Rs. 15000 will be collected as tax.

3. In case the foreign remittance made under the scheme is for education via a loan secured through some institution then TCS rate shall be for amount over Rs. 7 lakhs and the rate at the rate of 0.5% shall apply.

4. However, if the remittance is for foreign travel and is being remitted to the foreign tour operator then TCS rate @ 5% shall apply on the total remitted amount and the remitted amount shall not be subsumed within the Rs. 7 lakh threshold limit.

 

5. Also, if the remitter is a non-resident then to the TCS charged an increase in surcharge as well as health and education cess becomes applicable.

6. Further, on the TCS amount, GST shall not be applicable. Also, in case the remitter is liable to deduct TDS under any of the provisions then this TCS ruling will not apply. Also, the ruling will not be applicable in case the remitter happens to be a government entity or is any person notified by the government.

GoodReturns.in

Read more about: foreign remittance lrs tcs
Story first published: Saturday, May 2, 2020, 11:04 [IST]
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