Introduction: The landscape of Tax Collection at Source (TCS) on Liberalised Remittance Scheme (LRS) and overseas tour program packages has witnessed significant changes with the amendments introduced by the Finance Act, 2023. However, in response to stakeholder feedback, the Central Board of Direct Taxes (CBDT) has fine-tuned these changes to strike a balance between compliance and the interests of genuine taxpayers. This article delves into the key modifications, providing a comprehensive understanding of the adjusted TCS rates and their implications.
What are the changes in TCS rates?
The Finance Act, 2023 had amended section 206C of the Income-tax Act, 1961 to increase the rate of TCS from 5% to 20% for remittance under LRS as well as for purchase of overseas tour program package. It had also removed the threshold of Rs 7 lakh for triggering TCS on LRS. These changes did not apply when the remittance is for education and medical purpose.
However, after receiving feedback from various stakeholders, the CBDT has decided to modify these changes as follows:
– Threshold of Rs. 7 lakh per financial year per individual in clause (i) of sub-section (1G) of section 206C shall continue to apply for payments through all modes of payment, regardless of the purpose. Thus, for first Rs 7 lakh remittance under LRS there shall be no TCS (other than oversea tour package). Beyond this Rs 7 lakh threshold, TCS shall be at the rate of:
– 0.5% (if remittance for education is financed by loan taken from a financial institution);
– 5% (in case of remittance for education/medical treatment);
– 20% for others.
– For purchase of overseas tour program package under clause (ii) of sub-section (1G) of section 206C, the TCS shall continue to apply at the rate of 5% for the first Rs 7 lakh per individual per annum, the 20% rate will only apply for expenditure above this limit.
– Increased TCS rates to apply from 1st October, 2023: The increase in TCS rates, which were to come into effect from 1st July,2023 shall now come into effect from 1st October, 2023 with the modification as above. Till 30th September,2023, earlier rates (prior to amendment by the Finance Act, 2023) shall continue to apply.
The CBDT has stated that these changes are aimed at removing difficulty in implementation of the provisions and providing relief to taxpayers who are making genuine remittances under LRS or purchasing overseas tour program packages. The CBDT has also clarified that these changes are not intended to alter the tax liability or incidence on any person.
However, taxpayers who are planning to make remittances under LRS or purchase overseas tour program packages should be aware of the applicable TCS rates and comply with the relevant provisions. The TCS collected by the banks or authorised dealers will be reflected in Form 26AS of the taxpayer and can be claimed as credit against the income-tax liability.
Conclusion: In conclusion, staying abreast of the adjusted TCS rates on LRS remittances and overseas tour program packages is crucial for taxpayers navigating the intricate terrain of Indian tax regulations. The modifications introduced by the CBDT, effective from October 1, 2023, with threshold adjustments, aim to strike a balance between compliance and the interests of genuine taxpayers. It is advisable for individuals and businesses to consult their tax advisors before making any decisions based on this information, ensuring seamless compliance and informed financial decisions.
This article is based on information available on FAQs on TCS on LRS and purchase of overseas tour program package and other sources. It is intended for general guidance only and does not constitute legal or professional advice. Readers are advised to consult their tax advisors before taking any action based on this article.
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