TCS Increase for Medical Care Abroad: What to Know and How to Manage
Team Niyo
Overview
Overseas medical expenses from India now involve understanding Tax Collected at Source (TCS). This overview breaks down TCS rates for medical treatments abroad and outlines the steps to claim this tax as a credit. It’s a crucial piece of financial planning for anyone seeking healthcare services internationally.
Share
This Blog
Overview
Overseas medical expenses from India now involve understanding Tax Collected at Source (TCS). This overview breaks down TCS rates for medical treatments abroad and outlines the steps to claim this tax as a credit. It’s a crucial piece of financial planning for anyone seeking healthcare services internationally.
Team Niyo
Introduction :
Are you considering overseas medical treatment or have loved ones in need of healthcare services abroad? If so, there’s a critical financial component you should be aware of: Tax Collection at Source (TCS). It might sound technical, but it’s an important part of your planning process — like packing your bags or booking your flights!
With recent updates to the Indian tax regulations under the Liberalised Remittance Scheme (LRS), there’s a bit more to consider financially when you’re looking at medical treatment outside of India.
Keep That 7 Lakh Figure in Mind
TCS rate :
| Purpose | TCS Limit | TCS rate |
| Medical Treatment | Up to Rs 7 lakh | 0% |
| Medical Treatment | Above 7 Lakh | 5% |
If an individual remits Rs 10 lakh for medical treatment abroad after October 1, 2023, the TCS would be calculated as 5% of Rs 3 lakh (the amount over the Rs 7 lakh threshold). The TCS to be paid would be 5 %* Rs 3,00,000 = Rs 15,000.
Scope of Medical Remittances Under LRS
The scope of remittances for medical treatment is quite comprehensive. It includes:
- The purchase of tickets for the patient and their attendant to travel overseas for medical treatment.
- The medical expenses incurred abroad.
- Other day-to-day expenses that are necessary for the purpose.
These transactions fall under RBI code 50304 for medical treatment. Consultations and treatments without the patient traveling, are covered under code 51108.
Impact of TCS on medical treatment abroad:
- Financial Burden for Patients: Patients will incur an extra 5% cost on amounts over Rs 7 lakh, raising overall expenses for medical treatment abroad.
- Operational Adjustments for Banks: Financial institutions must adapt their systems and inform customers about the new TCS requirements.
- Enhanced Tax Compliance: The TCS is designed to improve tax compliance, ensuring taxes are collected on large foreign remittances.
- Influence on Medical Decisions: The added cost may lead individuals to reconsider overseas medical treatments or seek alternatives.
- Impact on Medical Tourism: Countries that attract medical tourists from India may need to adjust their strategies due to the increased costs for Indian patients.
- Tax Return Adjustments: Patients will need to claim TCS as a credit on their tax returns, necessitating proper documentation and record-keeping.
- Potential for Policy Evolution: The government may refine the policy as it evaluates its impact, and the insurance industry could respond with tailored products.
Documentation:
- Form 26AS: This is a consolidated tax statement that includes details of TCS on various transactions. Individuals must ensure that the TCS deducted on their remittances for medical treatment abroad is accurately reflected in their Form 26AS.
- Bank Statement: It should show the remittance of funds for which TCS was collected. This serves as proof that the remittance occurred, and TCS was paid.
- Tax Return Form: When filing income tax returns, the amount of TCS that has been collected will be credited against the total tax liability of the individual. The individual must claim this credit in their tax return form. The TCS amount from Form 26AS should be included in the tax return.
- Undertaking from the Remitter: The authorized dealer (typically a bank) will require the remitter to provide an undertaking. This document should detail previous remittances under LRS to ensure the correct application of TCS rates.
- Receipt of TCS Payment: In some cases, the bank may provide a receipt for the TCS deducted at the time of the remittance. This receipt should be kept safely as it can be used as a document for claiming TCS credit.
- Other Supporting Documents: Depending on the case, additional documents such as medical bills, proof of hospitalization, or any other document that can substantiate the remittance was for medical treatment may be required.
Claiming Tax Collection at Source (TCS) credit for remittances made for medical treatment abroad involves the following steps:
- Verify Form 26AS: Confirm that the TCS deducted is accurately reflected in your Form 26AS, which is accessible from the income tax e-filing website.
- File Income Tax Return (ITR): While filing your ITR, include the TCS amount under the tax credit section as pre-paid tax.
- Claim Credit: When calculating your tax liability, deduct the TCS amount. If the TCS exceeds your tax due, you’re entitled to a refund.
- Documentation: Have your bank statement and remittance acknowledgment handy in case they’re needed for verification.
- Assessment and Refund: After filing, the tax department will assess your claim. If validated, any excess TCS will be refunded to your account.
Conclusion:
Frequently Asked Questions
1. What documents should I keep for TCS on medical remittances?
You should keep the TCS certificate issued by the bank, medical bills, and proof of remittance, as these will be required when filing your tax return and claiming TCS credit.
2. What if the patient is traveling abroad for medical treatment multiple times in a year?
If the total remittance for all trips in the financial year exceeds Rs 7 lakh, TCS will be applicable on the amount that goes over this limit.
3. Is TCS applicable if I am making payments for medical treatment abroad in installments?
Yes, TCS applies to each installment if the cumulative remittance amount in a financial year crosses the Rs 7 lakh threshold. Each payment is counted towards the annual limit, and once the total remittances exceed Rs 7 lakh, TCS will be charged on the amount exceeding this threshold. It’s important to track the total remittances to anticipate when the TCS will be applicable.
4. What happens if I remit money for medical treatment but later cancel the treatment and get a refund?
In such cases, you can still claim the TCS amount as a credit when you file your income tax return. If the refunded amount is also returned to your Indian account, it doesn’t change the fact that TCS was deducted at the time of the original remittance. You should include the TCS in your tax return.
