New 20% TCS from October 1, 2023: Be ready for a cash crunch if you invest in international stocks; how to reduce TCS impact
TCS rule is going to impact your investment from tomorrow.
20% TCS from October 1, 2023: What changes for foreign investments?
At present, there is no TCS on foreign remittances up to Rs 7 lakh in a year. If investors remit more than Rs 7 lakh for investing in foreign securities under the Liberalised Remittance Scheme (LRS), a TCS of 5% is applied now.
Nature of payment
TCS rate
Overseas investments of up to Rs 7 lakh via LRS
Nil
Foreign investments of more than Rs 7 lakh via LRS
5%
Source: Ministry of Finance
What is going to change next month?
The Budget 2023 hiked TCS on foreign remittances of more than Rs 7 lakh through the LRS to 20% for investments in overseas assets, real estate, bonds, foreign company stocks, etc., says Raju Kumar, Tax Partner, EY India. The higher rate comes into effect on October 1, 2023. Here's the low-down on TCS and its implications for investors:
Let us assume you are an Indian resident investing directly in US stocks. You have already invested Rs 7 lakh in the financial year concerned, and want to put Rs 1 lakh more into your overseas broking account. If you remit Rs 1 lakh to the broking account through a bank, Rs 20,000 will be deducted as TCS (by the bank) and only Rs 80,000 will go into the broking account. So, if you wish to buy shares worth Rs 1 lakh (after exhausting the limit of Rs 7 lakh), you will have to deposit Rs 1.25 lakh. Only then will your brokerage account get Rs 1 lakh as 20% (which is Rs 25,000) will be deducted as TCS.
Nature of payment
TCS rate
Overseas investments of up to Rs 7 lakh via LRS
Nil
Foreign investments of more than Rs 7 lakh via LRS
20%
Source: Ministry of Finance
TCS
