New Rules: Putting an end to the long-running discussions, the Reserve Bank of India (RBI) has decided to implement new rates of Tax Collection at Source (TCS). Let us know about it in detail.
Actually, Tax Collection at Source or TCS is a tax levied on any type of transaction done by Indian citizens including studying, traveling or investing abroad. The changes in TCS rules will be implemented from next month, October 1, 2023. Any kind of expenditure and transaction done abroad will be directly affected by these rules. Let us know how much TCS will be charged for which purposes-
Spend abroad
If a person spends a large amount abroad within a financial year, TCS will be applicable on it. However, TCS will not be charged on using international credit cards.
TCS rate for outward remittance
Under the Reserve Bank of India (RBI) Liberalized Remittance Scheme (LRS), any person can send an amount of up to $ 250,000 abroad in a year. According to the new rules, from October 1, 20 percent TCS will be levied on sending amounts of more than Rs 7 lakh for any purpose other than medical and education.
TCS on education expenses
If a person sends money abroad for education, then no TCS will be charged on the amount less than Rs 7 lakh. But if this amount is more than Rs 7 lakh, then 5 percent TCS will be charged on it. However, if this amount is loaned from an approved financial institution, then only 0.5 percent TCS will be applicable.
TCS on medical expenses
Like education, no TCS will be applicable on medical expenses up to Rs 7 lakh. But if this amount exceeds Rs 7 lakh, then 5 percent TCS will be applicable.
TCS on tour packages
After the first of the next month, if a person buys a foreign tour package worth less than Rs 7 lakh, then 5 percent TCS will be levied on it. Whereas 20 percent TCS will be applicable on purchasing tour packages worth more than Rs 7 lakh.
TCS on investment
If a person invests more than Rs 7 lakh in foreign stocks, mutual funds, cryptocurrency or property in a financial year, then 20 percent TCS will be applicable on that amount. However, no TDS will be levied on domestic mutual funds with foreign stock exposure.
TCS on Debit/Credit/Forex Cards
If a person does a transaction of more than Rs 7 lakh through debit and forex cards, then 20 percent TCS will be applicable on him from the 1st of the next month. However, no TCS will be charged on transactions done through credit cards.
TCS rate for financial year
There are different TCS rates for the first and second half of any financial year. But the limit of Rs 7 lakh for an individual is for the whole year.
Different sources and limits
If a person uses different banks or dealers to make any expenditure abroad in a financial year, the limit will be only Rs 7 lakh across all sources. However, this limit is different for different purposes.
How to get TCS refund?
It is most important for a person paying Tax Collection at Source (TCS) to know that it is not a separate tax but a tax credit. Which can be offset against taxes payable during income tax filing or advance tax payment. Also, if it has not been offset, it can be claimed as a refund while filing Income Tax Return (ITR). However, experts say that this may cause cash flow problems to some taxpayers because after processing of ITR, the funds will remain locked till the refund is made.
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