The government has, however, offered some carve-outs so that not every overseas remittance will be subject to TCS
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 1 October.
As per the Finance Act of 2020, funds sent abroad under the RBI’s liberalised remittance scheme is subject to a 5% TCS subject to riders.
The government has 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 Rs700,000 and is not for buying a tour package. Also, on payments above Rs700,000, 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 Rs700,000.
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 27 March made these provisions applicable from 1 October. Many financial institutions have communicated the applicability of TCS on remittances from October to customers.
Source: livemint
