Budget 2024 Important Points on TCS
Introduction: Discover the significant amendments to Tax Collected at Source (TCS) on foreign remittances as unveiled in the Budget 2024 by Finance Minister Nirmala Sitharaman. This article delves into the crucial points impacting individuals, businesses, and the Liberalised Remittance Scheme (LRS).
Finance Minister, Nirmala Sitharaman presented her sixth consecutive budget for the year 2024-25 in the Parliament on February 01, 2024. The Interim budget 2024 was mainly emphasized on empowering youth and women, developing infrastructure, supporting agriculture, promoting green growth, and enhancing the railway sector. Amongst the six budgets presented by her, this speech recorded the shortest speech by her on record which was lasted exactly for 58 minutes.
No significant tax announcements were proposed in this budget under Income Tax and GST. hence, the 45-pager finance bill comes with a curiosity as to what forms part of it So, this is mainly to make everyone aware that what does 45-page finance bill include.
Finance Bill is a Money Bill in which the government seeks to levy new taxes, make alterations in the current tax structure, or make proposals for the continuance of the present tax structure for a certain period beyond what was originally approved by the Parliament. The Parliament approves this bill for one fiscal year. Post approval, Finance Bill becomes the Finance Act.
Finance bill 2024 was presented with only few necessary procedural changes except one or two amendments. The fact that the income tax rates are notified in Finance Bill, major part of finance bill (40 page) consists of tax rates which have been notified with no changes in budget 2024. Rest 5 pages consists of procedural amendments and changes barring one or two.
In the last Budget, the government had announced a hike in the TCS rate on foreign remittances under the Liberalised Remittance Scheme (LRS) and on bookings of foreign tour packages from 5 percent to 20 percent on amount exceeding Rs 7 lakh. This was to take effect from July 1, 2023. The implementation date was later postponed to October 1, 2023 vide Circular No. 10 of 2023 dated 30th June, 2023 However, this was not formally incorporated in the Income Tax Act. The Interim Budget 2024 has paved the way for the formal inclusion of the increased Tax Collected at Source (TCS) rates on foreign remittances, as previously announced in the 2023 Budget, into the Income Tax Act. The adjustment is set to come into effect following the parliamentary approval of the corresponding amendment.
You can refer to the article below for detailed understanding of the amendment and provision:
TCS on Foreign Remittances: 2023 Changes and Implications: https://taxguru.in/income-tax/tcs-foreign-remittances-2023-implications.html
However, important points relating to TCS on foreign remittances are as follows:
Important Points:
1. TCS on expenditure through international credit card while being overseas though has also been brought under liberalized remittance scheme by omissions of Rule 7 of Foreign Exchange Management (Current Account Transactions) Rules, 2000 but TCS has been suspended till further orders by guidelines issued under Circular No. 10/2023 dated 30/06/2023. TCS on expenditure through international debit card/ATM is covered by LRS and shall attract TCS.
2. Expenses of business visit of employee are borne by entity. Such expenses shall be treated outside LRS and may be permitted without limit and shall not attract TCS.
3. The limit of Rs. 7 lacs shall apply in aggregate to all types of remittances and not to be applied to every purpose individually. However, for overseas tour packages limit of 7 lacs shall not be clubbed with LRS remittances.
4. The limit of Rs. 7 lacs for LRS shall apply for the entire FY 2023-24 and not only for period post 01/07/23 or 01/10/2023.
5. The limit of Rs. 7 lacs are qua remitter and not qua authorized dealer. The authorised dealer may obtain an undertaking from remitter for remittances through other dealers, till RBI develops system. The remitter shall be responsible for false undertaking, if any.
6. Where purchase of overseas tour package is covered by LRS also, TCS shall apply treating the same as overseas tour package and not remittance under LRS as the specific provisions override general provision.
7. TCS on foreign remittance shall not apply to non-resident who does not have establishment in India.
8. TCS on foreign remittance shall not apply where TDS is applicable.
9. The tax at source (TCS) will be applicable to all forex purchases/ outward remittance(s) under the Liberalized Remittance Scheme (LRS) as per FEMA Act 1999, which includes the purchase of foreign currency notes, Forex Cards, outward remittances and also for payments made for purchase of overseas tour packages.
10. TCS will be applicable only to the amount in excess of Rs 7 lakhs in a financial year.
11. LRS transactions without PAN are not allowed.
Conclusion: As Budget 2024 unfolds, the spotlight on TCS changes in foreign remittances adds a layer of complexity. This analysis aims to provide clarity on key points, ensuring individuals and businesses comprehend the nuances and implications of these crucial amendments.
Author Bio
