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 1st October 2020.

As per the Finance Act 2020, funds sent abroad under the RBI’s liberalised remittance scheme is subject to a 5% TCS subject to certain riders.

The Government has, however, offered some carve-outs so that not every overseas remittance will be subject to TCS.

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 INR 700,000.

Also, on payments above INR 700,000, the TCS will apply only on the amount above this threshold if the purpose is not for buying a tour package.

TCS on foreign remittances

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 rate of 0.5% on the payment above INR 700,000.

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 202 made these provisions applicable from 1 October.

The finance ministry has been extending the scope of both TDS and TCS and encouraging electronic payments to have a better idea of transactions in the economy and to be able to match the spending pattern of assessees with their reported taxable income.

Many financial institutions and Banks have been communicating the applicability of TCS on remittances from October onwards,  to their customers.

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Qualification: CA in Practice
Company: Sanjay Thampy and Associates
Location: Mumbai, Maharashtra, IN
Member Since: 22 Apr 2020 | Total Posts: 11
A practicing Chartered Accountant, I expertise in direct and indirect tax laws providing advisory services to various large and medium sized corporates. View Full Profile

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10 Comments

  1. Preeti Bhargava says:

    My sons education loan for abroad is Rs 17 lakh from Bank and I have to pay Tution fee and GIC total Rs 17.60 lakh.How much tcs I have to pay for remittance. Whether it is for sixty thousand or for whole amount.

  2. vinay tanjorkar says:

    I am accountant of on machine balancing unit. My company owner family is live in USA. During last year my owner is going to USA to meet his family but due to covid he not able to come in india so for his monthly expense he is transfer amount from india to usa. so my question is tcs applicable on transfer of such fund more than 7.0 lacs for whole year and if applicable what is rate and can i claim this tcs amount on his income tax return.

  3. Pardeep says:

    I am a govt employee and pays income tax on my income from salary. I want to remit foreign exchange as a gift to my son from my retirement benefits and GPF which are tax exempted. Will it attract TCS?

  4. NARESH KHETRAPAL says:

    Whether Rebate for Education Purpose foreign remittances w.e.f 01 October 2020 is applicable for Eduction Loan only or to any type of Loan.???

  5. Nagaraj R says:

    We are International tour operators, so 5% TCS will be applicable any transaction which happens with International suppliers who provide Travel services!!!

  6. Mohan S says:

    Is payment agsinst imports of goods covered under this provision? On a plain reading I am of the viee this doesn’t seem to apply for import payments.

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