20% TCS on Debit Cards - How to Use Them Smartly and Save Money
Team Niyo
Overview
A new tax rule imposes a 20% TCS on foreign transactions with debit cards over INR 7 lakh yearly. Few strategies for smart spending and claim the tax back on your returns.This brief highlights tips for handling TCS and optimizing tax credits.
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Overview
A new tax rule imposes a 20% TCS on foreign transactions with debit cards over INR 7 lakh yearly. Few strategies for smart spending and claim the tax back on your returns.This brief highlights tips for handling TCS and optimizing tax credits.
Team Niyo
Introduction
TCS on debit cards :
TCS Rate on debit cards :
| Purpose of Remittance | Threshold | TCS Rate |
| Education (loan financed) | Above 7 lakh | 0.5% |
| Education/Medical (non-loan) | Above 7 lakh | 5% |
| Other Purposes (Investment, Gifts) | Above 7 lakh | 20% |
| Overseas Tour packages | Up to 7 lakh | 5% |
| Overseas Tour packages | Above 7 lakh | 20 % |
| Travel (without package ) | Above 7 lakh | 20% |
Groups Impacted by the 20% TCS :
- Individuals traveling abroad for leisure or work.
- Students paying for overseas education.
- Shoppers purchasing from international websites.
- Businesses importing goods or services.
- People undergoing medical treatments outside India.
Tips to Reduce the Impact of 20% TCS or Avoid :
- Credit card : As of now Tcs does not apply to credit cards , but if it has hidden charges it might cost you more . You can always claim your TCS back , so Debit could add value .
- Split Your Transactions: Break down larger payments with fellow travelers , family and partners to potentially avoid hitting the threshold that triggers the 20% TCS.
- 7 lakhs Limits : Always remember the 7 lakh threshold mark , Avoid crossing it.
- Tax Credits: Be aware that the TCS is not an additional tax but a part of your income tax. You can claim it back as a credit .
Maximizing Tax Credits Against TCS:
The Tax Collected at Source (TCS) on foreign transactions is not an extra burden but rather a pre-payment towards your income tax. Here’s how you can maximize your tax credits:
- Claiming TCS on Returns: When you file your annual income tax returns, you can claim a credit for the TCS amount paid. This is deducted from your total tax liability for the year.
- Documentation: Keep all your TCS receipts and certificates organized, as you will need them to substantiate your claim during tax filing.
- Utilize the Full Credit: Ensure you claim the full TCS amount paid. Any excess TCS after offsetting your liability can be carried forward or refunded.
- Professional Advice: Consult with a tax professional to understand the best way to claim this credit, especially if you have multiple sources of income or complex tax situations.
- Timely Filing: File your income tax returns on time to take advantage of the TCS credit without any delays or complications.
Legislation and Your Rights Regarding TCS:
The TCS on foreign transactions is part of the Income Tax Act, 1961. It’s designed to pre-collect tax, not overburden you. As a taxpayer, you have the right to:
- Be informed about TCS rates and reasons for collection.
- Claim the collected TCS as a tax credit when filing returns.
- Receive a refund for any TCS that exceeds your tax liability.
- Seek resolution from the Income Tax Department if there are discrepancies.
Conclusion
Frequently Asked Questions
1. Can I claim a refund for the TCS on my debit card transactions?
Yes, if the TCS paid exceeds your tax liability, you can claim a refund when filing your income tax returns.
2. How can I minimize the TCS on my international debit card spending?
Consider using other payment methods, splitting larger transactions, and planning your spending to avoid exceeding the TCS threshold.
3. Will I pay more tax because of the 20% TCS on my debit card?
No, this TCS is a form of tax prepayment, not an additional tax. You can offset it against your income tax due.
4. Does TCS apply to Credit cards ?
It doesn’t apply as of now , But it may have hidden charges which may cost you more which you cannot claim .
