Frequently Asked Questions (FAQs) on New Tax Collected at Source (TCS) on Forex Transactions Under LRS

In the brand new Union Budget 2023, Nirmala Sitharaman, the Finance Minister of India, has proposed a variety of modifications to the construction of Tax Collected at Source (TCS). It goes to have an effect on foreign exchange transactions and outward remittances made beneath Liberalised Remittance Scheme (LRS) from July 1st, 2023. If you’ve queries relating to this subject, you may confer with the FAQs part within the following for some clarifications.

Frequently requested questions (FAQs) in regards to the newest modifications to Tax Collected at Source (TCS) on foreign exchange transactions 

1. What is Tax Collected at Source (TCS)?

In easy phrases, Tax Collected at Source or TCS is a kind of tax that’s payable by the seller of particular commodities which they purchase from the shopper through the time of the nice’s sale. 

2. When will the brand new TCS amendments get carried out?

The newly proposed TCS amendments by Nirmala Sitharaman within the Union Budget 2023 will probably be totally carried out from 1st July 2023. It will apply to all foreign exchange transactions and outward remittances made beneath LRS.

3. What is the brand new change within the TCS construction?

As per the proposal, all abroad outward remittances, apart from medical and academic functions, made by way of LRS in a fiscal yr will entice a 20% Tax Collected at Source (TCS) from 1st July 2023. The TCS price previous to this was solely 5%, which utilized to overseas outward remittances past the brink of INR 7 lakhs. As for foreign exchange transactions made for company/business-related journey, it doesn’t fall throughout the bounds of LRS, therefore, won’t be topic to Tax Collected at Source.

4. Are remittances for medical and academic functions exempt from the brand new TCS charges?

Individuals ought to know that each schooling and medical remittances are nonetheless topic to TCS however will probably be charged in keeping with their previous charges. The new TCS amendments make it clear that the increment applies to all overseas outward remittances performed beneath Liberalised Remittance Scheme (LRS) other than medical and academic functions. So, the relevant TCS on remittances for these two functions will nonetheless be 5%. And within the case of schooling remittances the place the funds had been sourced as a mortgage, the TCS to be charged continues to be 0.5%. 

5. Can I get the Tax Collected at Source a reimbursement?

Yes, people ought to know that TCS will be altered in opposition to their general revenue tax due and claimed when submitting tax returns.

6. Does TCS on overseas remittances beneath LRS apply on solely the surplus of INR 7 lakhs or all the quantity?

Prior to the proposal, Tax Collected at Source on foreign exchange purchases and abroad remittances was relevant to the worth exceeding the brink of INR 7 lakhs inside a fiscal yr. However, from July 1st 2023, onwards, all overseas remittances made beneath LRS (apart from medical therapy and academic functions) will probably be liable to a 20% TCS with none threshold.

7. Are worldwide bank card spends now included beneath LRS transactions?

Until lately, bank card spending was not coated by LRS. But the Ministry of Finance has advised that LRS be utilized to bank card expenditures as effectively. It continues to be not clear whether or not bank card transactions will fall throughout the set threshold or have their particular higher restrict. 

8. How does TCS apply now on remittance for medical therapy functions?

The TCS charges for remittance associated to medical therapy will hold following the previous price, which is 5% of the quantity or the mixture quantity in extra of INR 7 lakhs. For occasion, suppose you need to remit INR 9 lakhs for medical therapy functions beneath LRS, then the relevant TCS at 5% can be INR 10,000 beneath these situations.

9. What are some items on which tax must be collected from consumers?

You can discover particulars about TCS on particular commodities and providers by going by the Income Tax Act’s part 206C. The authorities has included TCS on overseas remittances beneath LRS in extra of INR 7 lakhs in a fiscal yr throughout the identical part. The buy of foreign exchange playing cards and overseas foreign money notes are just a few examples of merchandise/providers on which this tax is relevant. 

10. If a overseas alternate facility has been utilised in foreign exchange playing cards or money, would Tax Collected at Source (TCS) nonetheless apply?

Yes, a Tax Collected at Source of 20% will probably be relevant for the acquisition of all foreign exchange pre-paid playing cards or overseas foreign money money from July 1st 2023, onwards. 

11. Do I have to pay TCS for non-PAN transactions beneath LRS?

Actually, a Permanent Account Number (PAN) is required for making transactions beneath Liberalised Remittance Scheme (LRS). 

12. How will the brand new TCS charges have an effect on remittances made for overseas tour packages beneath LRS?

From July 1st 2023, onwards, a Tax Collected at Source (TCS) of 20% will probably be collected on remittances for the aim of abroad tour packages, no matter any threshold restrict.