Refund of TCS on International Remittance – The What & How!

Overview of TCS

Finance Minister Nirmala Sitharaman, while presenting the Union Budget in February 2023, had announced some changes. It included the addition of the New Tax Regime and another major introduction was that of the Tax Collected at Source, TCS on transactions. Section 206C of the Income Tax Act states on which goods sellers need to collect tax from buyers. It is important to note that a higher TCS on remittances simply means an increased cost of the transaction for both the sender and receiver when trying to send or receive money from another country. The TCS rate on remittances under LRS has gone up from 5% to 20% in the 2023 budget. The rate now covers all transfers, except those intended for medical purposes. Examples include:

• Foreign Tour Packages
• Providing Loans/Sending Gift Money To Relatives Living Abroad
• Buying Stocks Of Foreign Companies
• Purchasing Property Abroad
• Immigrants Remitting Funds To Their Foreign Bank Account

Eligibility For Claiming A Refund Of TCS

If someone has paid TCS (Tax collected at Source) on remittances, they can request a refund under the following conditions:

•  If the total TCS amount is higher than the taxpayer’s tax liability for the year
•  If the taxpayer files their ITR (Income Tax Return) on time
•  If the taxpayer possesses supporting documents for remittances, such as bank statements and Forex card statements

Scenarios Where TCS Refund Can Be Claimed

1. In such cases, when money is sent abroad for a medical purpose, the person in receipt of payment will be required to pay TCS @5%. If his actual tax liability for the year is more than 5% he can claim refund on excess TCS paid by him.
   
2. In a case where money is being remitted out of India for any purpose, other than education or for the purpose of any medical treatment, then TCS rate payable shall be 20%. Where the actual tax liability of such person in whose case such TCS has been paid is more than 20%, such person can claim refund of extra TCS so paid.
   
3. If a person remits money through a travel card and is unable to utilize the entire amount loaded on to the card, then he shall be allowed refund of TCS on the unutilized amount.

Also read: Exemptions From TCS – TCS on International Money Transfer

How Do I Claim Refunds Of TCS On Foreign Remittances?

To claim a refund for TCS (Tax Collected at Source) on remittances, follow these steps:

• File your Income Tax Return ITR before the due date.
• Log in to ITR, websites; search for either TDS or the ‘Tax Deducted at Source section.
• Request refund of TCS paid on remittances.
• Include a bank statement or Forex card statement that clearly shows the deduction of TCS.
• Provide any supporting documents related to the remittance.
• After filing your ITR for the financial year, the Income Tax Department will thoroughly approve your refund claim.
• Should you have any uncertainties or inquiries concerning your refund, it is advisable to seek guidance from a tax professional.

Please note that these steps are crucial in ensuring a process for obtaining your refund on TCS paid towards remittances.

Our related blogs on TCS

• Understanding the TCS Threshold Limits On International Remittances
• All You Need To Know About TCS On International Money Transfers
• How To Avoid 20% TCS On Foreign Remittances & Money Transfer

The Road Ahead

The rate of TCS has been increased to bring in tax revenue and spur spending. This move will hit the long-term growth prospects of the Indian economy. It should be remembered that claiming a refund of TCS on foreign remittance is a bit of a cumbersome process. A lot of attention is required towards the law of taxes, so one is advised to take professional help from a tax consultant. Records and documentation pertaining to your remittances can help you a lot. Being better informed and taking initiative may also increase the chances of getting a refund by a long shot. Remember, compliance is the key. Take all steps on the way, and explore options.