LRS allows a person to remit up to $250,000 in a financial year for expenses such as travel and education, as well as capital account transactions like investing in the foreign stock markets.
Authorised dealers, typically banks and remittance companies will collect 5% tax at source (TCS) once LRS remittance(s) made by an individual crosses 7 lakh in a financial year. This new rule goes live from today, i.e., October 1. Does it add to the cost of fund transfer abroad? Not really. “The tax paid should not confuse it as an additional cost or tax on the fund transfer. The TCS will be reflected as tax credit in your Form 26AS. So, the amount of TCS can be claimed as credit against tax payable while filing income tax returns. In case the TCS is higher than your tax payable, you will get a refund,” says Viram Shah, Co-Founder and CEO, Vested Finance.
What is LRS or Liberalized Remittance Scheme?
Some basics first. LRS allows a person to remit up to $250,000 (around ₹1.83 crore at an exchange rate of 73.50) in a financial year for expenses such as travel and education, as well as capital account transactions like investing in the foreign stock markets. Now, a tax will be collected at source on foreign remittances above Rs7 lakh.
Source: livemint
