TCS paid on foreign remittances, purchase of car can be used to lower TDS on salary The initial implementation was met with criticism and a delay. Now, TCS applies only if remittances exceed Rs 7 lakh per year, with exceptions for education (0.5% or 5% TCS) and medical treatment (5% TCS). Travel package remittances up to Rs 7 lakh attract 5% TCS, with 20% above that. International credit cards are exempt from LRS and TCS
The Budget 2024 has proposed to lower the higher tax deduction for individuals. As per the announcement, individuals who have paid TCS on foreign remittances, foreign travel and purchase of car etc. can now inform the same to their employer to reduce their TDS on salary.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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Employers can now consider the Tax Collected at Source (TCS) related to their employees' foreign remittances/ or any other remittances (such as TCS on car etc.) when calculating the Tax Deducted at Source (TDS) on salaries. This change allows for a lower TDS deduction for employees, streamlining the process of claiming refunds for any overpaid tax.
It is important to note that budget 2023 increased the TCS on foreign remittances Liberalised Remittance Scheme (LRS) to 20% from 5%, except in certain cases. The new rates were effective from July 1, 2023. It also brought international credit card payments under LRS and imposed TCS on it. The high rate of TCS attracted a lot of criticism at that time. After facing severe backlash from common people and industry experts, the Finance Ministry rolled back its decision. Based on the numerous suggestions, the Finance Ministry put a threshold of Rs 7 lakh to apply TCS.
All overseas outward remittances (bank account transfer, foreign exchange, loading forex card), except for medical and educational purposes, made via LRS now attract TCS at 20% if the amount is above Rs 7 lakh in a financial year. No TCS applies for forex transactions of below Rs 7 lakh, except in certain cases. The new rates finally came into effect from October 1, 2023.
Under LRS, there is no TCS on foreign remittances below Rs 7 lakh spent for educational expenses. If remittance above Rs 7 lakh spent for foreign education is through a loan obtained from an approved financial institution, it attracts TCS at 0.5%. Remittances above Rs 7 lakh spent for educational purposes not obtained through a loan attracts a TCS of 5%.
Any outward remittance for medical treatment attracts TCS at 5% if the threshold crosses Rs 7 lakh, from October 1, 2023.
Do remember that any remittance for travel and ancillary expenses related to education and medical treatment attracts TCS at the same rate applicable to remittances for education and medical treatment, according to the Ministry of Finance.
Do note that TCS is applicable at a concessional rate if you spend money for education or medical purposes abroad.
For an overseas tour package, a TCS of 5% is applicable if the amount is up to Rs 7 Lakh. Beyond this limit, a TCS of 20% is levied on a foreign tour package.
The Finance Ministry decided to keep international credit card payments outside the ambit of LRS. However, international payments made by debit card or forex card come under LRS and attract a TCS of 20% if they breach the limit of Rs 7 lakh in a financial year.
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This story originally appeared on: India Times - Author:Faqs of Insurances
