With a Raised 20% TCS Burden
The Buyt Desk
As per the new announcement in Budget 2023, the Tax Collected at Source (TCS) on foreign remittances, including bookings for tour packages, will rise 4 times from 5% to 20%. From July 1, 2023 you will have to keep additional money ready for the new “20% TCS” rule. An air ticket costing you Rs 50,000 will increase by additional Rs 10,000 with 20% TCS.
What is 20% TCS ?
TCS or Tax Collected at Source is basically a tax that sellers collect for their selected products and services from the customer. In terms of Foreign Remittance Transactions, it is the tax gathered from an individual making foreign transactions. Here, foreign transactions include sending money to a person, shopping and purchasing any asset, making an international trip, and more.
It is one of the new changes to the world of taxes for foreign transactions. The central government has notified changes of rules under the FEMA (Foreign Exchange Management Act), making 20% TCS a recent amendment. Indian citizens can transfer up to $250,000 in a financial year abroad, without the need for central bank approval.
Before the Union Budget 2023, the investment under the LRS beyond INR 7 lakh transaction value came under 5% TCS, applicable up to June 30, 2023. According to a recent amendment, all such foreingn currency transaction will come under 20% TCS from July 1, 2023. The Ministry of Finance clarified that foreign spending up to INR 7 lakh made through international credit or debit card will be exempted from TCS after June 30, 2023. But if the payment is done via online banking the entire payment with no minimum threshold will attract the increased TCS. The expenditure on education and medical treatment is exempted from higher TCS.
Can 20% TCS Be Claimed Back?
Yes individuals can file their income tax return and if TCS deduction is in excess of the tax liability then this amount will be refunded. But be prepared for a larger outgo when you spend in dollars, possibly blocking funds for many months until they get their return or claim the refund, and the gathered tax is adjusted. Taxpayers must track the TCS entries in Form 26AS.
Why is government levying this tax?
TCS is an advance collection of tax on expenses incurred by an individual. The rationale behind this move is to track whether the person making high value foreign remittance reflected proportionatelyin their income tax return or not.
