CBDT releases FAQs on tax collection at source (TCS) on foreign remittance, effective October 1, 2023
The government has issued a circular to remove the difficulty in the implementation of changes relating to Tax Collection at Source (TCS) on Liberalised Remittance Scheme (LRS) and on the purchase of overseas tour program packages. One needs to adhere to RBI’s LRS rules to invest in global equities, real estate etc.
Finance Act,2023 has amended sub-section (1G) of section 206C of the lncome-tax Act, 1961 to (i) increase the rate of Tax Collection at Source (TCS) from 5% to 20% for remittance under LRS as well as for purchase of overseas tour program package; and (ii) remove the threshold of Rs 7 lakh for triggering TCS on LRS. These two changes did not apply when the remittance is for education and medical purpose.
Question 1: Whether payment through an overseas credit card would be counted in LRS?
Answer: As announced in the press release dated 28th June, 2023, the classification of the use of international credit cards while being overseas, as LRS is postponed. Therefore, no TCS shall be applicable on expenditure through international credit card while being overseas till further order.
Question 2: Whether the threshold of Rs 7 lakh, for TCS to become applicable on LRS, applies separately for various purposes like education, health treatment and others? For example, if remittance of Rs 7 lakh under LRS is made in a financial year for education purpose and other remittances in the same financial year of Rs 7 lakh is made for medical treatment and Rs 7 lakh for other purposes, whether the exemption limit of Rs 7 lakh shall be given to each of the three separately?
Answer: lt is clarified that the threshold of Rs 7 lakh for LRS is the combined threshold for applicability of the TCS on LRS irrespective of the purpose of
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