Representative image of tax.
Credit: iStock Photo
The higher rate of 20 per cent TCS to be levied on spending above Rs 7 lakh on foreign tour packages and liberalised remittance scheme (LRS) will kick in from October 1.
Currently, funds transferred overseas under the Reserve Bank's LRS attract 5 per cent Tax Collection at Source (TCS) on amounts exceeding Rs 7 lakh.
The TCS rate will go up to 20 per cent from October 1.
Currently, LRS transfers up to Rs 7 lakh in a fiscal do not attract any TCS. The same provision will continue from October 1.
At present, purchase of overseas tour packages currently attracts 5 per cent TCS.
From October 1, such spending up to Rs 7 lakh will attract 5 per cent TCS. Above the threshold, TCS rate will be higher at 20 per cent.
An assessee can take credit of the TCS amount paid at the time of filing income tax returns for the relevant assessment year.
TCS of 5 per cent will continue to be levied on annual expenses exceeding Rs 7 lakh towards medical treatment and education each.
For those availing loans for overseas education, a lower TCS rate of 0.5 per cent would continue to be levied above the Rs 7 lakh threshold.
The Budget 2023-24 had raised TCS rates on LRS and foreign tour packages from 5 per cent to 20 per cent, effective July 1.
Later on June 28, the Finance Ministry announced deferring the implementation of higher rates to October 1.
Under the RBI’s LRS scheme, an individual can remit up to USD 2.5 lakh annually overseas without approval of the RBI. Remittances beyond the USD 2.5 lakh or its equivalent in foreign currency would require approval from the RBI.
The use of an International Credit Card for making payments towards meeting expenses while on a visit abroad is not part of the LRS and hence will not be subject to TCS. In 2021-22, a total of USD 19.61 billion was remitted under LRS, up from USD 12.68 billion in 2020-21. In 2022-23, it rose to more than USD 24 billion.