Those making foreign remittances need to pay attention to their tax collected at source (TCS) liability from next month as a key tax provision kicks in from 1st October 2020.
As per the Finance Act 2020, funds sent abroad under the RBI’s liberalised remittance scheme is subject to a 5% TCS subject to certain riders.
The Government has, however, offered some carve-outs so that not every overseas remittance will be subject to TCS.
For example, it will not apply if the amount remitted is less than INR 700,000.
Also, on payments above INR 700,000, the TCS will apply only on the amount above this threshold if the purpose is not for buying a tour package.
Considering many Indian students obtain loans to pursue education abroad, the TCS on remittances funded by financial institutions for foreign studies is kept at a lower 0.5% on the payment above INR 700,000.
Also, considering that many taxpayers are subject to taxes deducted at source (TDS), the TCS provision on remittances will not apply if the payer is subject to TDS under the Income Tax Act.
The Finance Act notified on 27th March 2020 made these provisions applicable from 1st October 2020.
The finance ministry has been extending the scope of both TDS and TCS and encouraging electronic payments to have a better idea of transactions in the economy and to be able to match the spending pattern of assessees with their reported taxable income.
Many financial institutions and Banks have been communicating the applicability of TCS on remittances from October onwards, to their customers.
Very informative. Though I know no one of this sort but will definitely help those who needs to be aware .
Thank you for sharing this information! One of my friends has taken load for studies… I will share this with him!
I always wanted to resolve the different between TDS and TCS and wanted to know if TCS remittance applied to TDS payers as well. The blog answered this question along with better clarity on other things. Worth a bookmark.
This is so informative and beneficial.. So glad to know everything about TCS and I am sure this will benefit many. Your blog brushes up my finance knowledge
I was not much aware about TCS though I have a little knowledge about TDS and that’s why it created confusion. Nice to read more about TCS and it’s features.