TCS stands for Tax Collected at Source. This is a sort of duty or tax that gets collected by the entity making any sort of payment, banks, or even a forex company, and deposits it with the government on behalf of the payee. TCS would apply over a range of transactions, inclusive of foreign remittances. In India, TCS on foreign remittances is limited to Rs. 7 lakh per annum, irrespective of mode and purpose. Thus, if your remittance exceeds Rs 7 Lakh in a financial year-excluding events on education and medicals-you will attract a TCS rate of 20% on that. In this blog, we cover the details with respect to the new limits, discuss implications and concerns relating to TCS on foreign remittances.
Analysis of Change in TCS on Foreign Remittances
Meanwhile, foreign remittances under the Liberalized Remittance Scheme attract charges with effect from October 1st, 2023. In case your foreign remittance exceeds Rs 7 lakh in a financial year, the TCS charged will be 20%, as amended to Section 206C of the Income Tax Act of 1961. This is the place where it is very relevant to mention that the higher TCS rate does not apply to remittances for educational and medical purposes.
| Type of Remittance Abroad | Present TCS Rate |
| For the purpose of education & medical treatment | 5% of the amount or the aggregate amount over Rs. 7 lakh |
| Education when a loan is used to fund education | 0.5% of the amount or the aggregate amount over Rs. 7 lakh |
| Overseas tour packages | 5% without any threshold limit w.e.f. October 1, 2023 (20% without any threshold limit) |
| Any other purpose | 5% of the amount or the aggregate amount over Rs. 7 lakh w.e.f. October 1, 2023 (20% without any threshold limit) |
Implications & Concerns For Taxpayers
The increase in TCS rate from 5% to 20% has brought implications and raises several questions before the taxpayers:
- Increased financial burden: Emigration leads to financial stress on individuals who send money abroad regularly because of increased TCS rates.
- Possible Double Taxation: Both the country where the remittance was sent from and the resident country will potentially tax those making foreign remittances.
- Complexity: The rules around TCS are confusing, which can be very burdensome for a taxpayer to comply with.
These factors highlight the impacts and difficulties faced by taxpayers due to the rise in the TCS rate.
Proposed Changes & Potential Impact
The decision of the government to increase the TCS rates from 5% to 20% in the Union Budget 2023 drew reactions from taxpayers and experts. Those who supported the proposal hailed the threshold, stating that it would ease burdens and support overseas remittances. Some felt that the increased TCS would act as a dampener on savings and investments in foreign markets. There were fears that the increase might inadvertently encourage tax evasion and illicit financial flows.
Why pay more for international money transfers when moneyHOP is here?
- NO hidden fees
- ZERO convenience fees
- Real-time updates
- Lowest exchange rates
Our other blogs on TCS
- Refund Of TCS On International Remittance – The What & How!
- Exemptions From TCS – TCS on International Money Transfer
- How To Avoid 20% TCS On Foreign Remittances & Money Transfer
In Summary
In a nutshell, one should be aware of the threshold limits that are assigned by the TCS on remittances. These limits put in place by the government serve to check the flow of money, actual compliances of the taxpayers, and prevention from frauds. It becomes very vital to keep oneself updated and informed so as to avoid penalties and delays. One can take professional advice from tax consultants if necessary. In this respect, moneyHOP guarantees an answer to cope with remittances in a very reliable way. Our solutions make cross-border transactions much easier, help with tax compliance, and ensure easy exhibitions of the transfers.
Leave a Reply