As per the Budget proposal, banks remitting funds overseas will have to collect tax at source at 20% without the applicability of any threshold limit

Budget 2023: Want to send money abroad? It will cost you more now This amendment will take effect from 1st July, 2023

If you are investing in international equities, buying a home abroad, or paying for your child's overseas education, this new Budget 2023 proposal will hurt your wallet.

As per the Budget proposal, banks remitting funds overseas will have to collect tax at source at 20% without the applicability of any threshold limit. This amendment will take effect from 1st July, 2023.

According to the Union Budget 2023 memorandum, “Section 206C of the Act provides for TCS on business of trading in alcohol, liquor, forest produce, scrap etc. Sub-section (1G) of the aforesaid section provides for TCS on foreign remittance through the Liberalised Remittance Scheme and on sale of overseas tour package.”

“In order to increase TCS on certain foreign remittances and on sale of overseas tour packages, amendment is proposed in sub-section (1G) of section 206C of the Act.”

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The current and proposed TCS rates are tabulated as under:

Type of remittance	Present rate*	Proposed rate*
For the purpose of any education, if the amount being remitted out is a loan obtained from any financial institution as defined in section 80E.	0.5% of the amount or the aggregate of the amounts in excess of Rs. 7 lakh.	No change.
For the purpose of education, other than (i) or for the purpose of medical treatment.	5% of the amount or the aggregate of the amounts in excess of Rs. 7 lakh.	No change.
Overseas tour package	5% without any threshold limit.	20% without any threshold limit
Any other case	5% of the amount or the aggregate of the amounts in excess of Rs. 7 lakh.	20% without any threshold limit

Note that the above table is for the amount or the total of the sums being sent by the buyer in a financial year is what the current rate and the proposed rate of TCS are based on in the table above.

According to a Times of India news report, earlier, in such cases, the remitting bank collected tax at source at 5% only if the amount or aggregate amount being remitted in a financial year exceeded Rs 7 lakh. “Further, the withholding tax applied only on the amount in excess of Rs 7 lakh (thus if Rs 10 lakh was being remitted, only Rs 3 lakh was subject to the tax collection norms). But these norms have now changed. The taxpayer can, of course, adjust the amount withheld as TCS against his tax liability, when filing the I-T return. But the higher TCS dents the cash flow, as this adjustment happens only later. Refund, if any, arising out of the higher TCS follows later. However, when it comes to pure educational expenses — such as fees — the tax collection at source (TCS) norms remain unchanged. If the amount is being remitted out of an eligible loan, then the TCS remains at 0.5% of the amount in excess of Rs 7 lakh. If the remittance towards education expense is not from a loan, the TCS is 5% of the amount, which is in excess of Rs 7 lakh,” stated the ToI new report. .
TCS norms relating to remittances for medical treatment also remain unchanged.
(With inputs from Times of India)

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This story originally appeared on: India Times - Author:Faqs of Insurances