What to expect in this article:
1. Latest Updates on LRS (Liberalised Remittance Scheme) and TCS (Tax Collected at Source) from Ministry of Finance.
2. What is LRS?
3. Why is TCS important?
4. Is TCS levied by Niyo Global?
6. Can you claim a TCS refund?
7. How to claim TCS refund?
On 28th June 2023, the Ministry of Finance announced that “There will be no change in the rate of TCS for all purposes under LRS and for overseas travel tour packages, regardless of the mode of payment, for amounts up to ₹7 lakh per individual per annum.”
Further, the increased TCS rates which were supposed to come into effect from July 1, 2023 shall now come into effect from October 1, 2023.
What does this mean for you when you travel or spend abroad
There are two important things:
- Firstly, there will be no TCS on spending through mediums like international debit and credit cards, forex cards, forex cash, or remittances till ₹7 lakh. For spends beyond ₹7 lakh, TCS shall be charged in three categories:
a) 0.5% if remittance for education is financed by an education loan;
b) 5% in case of remittance for education/medical treatment;
c) 5% till September 30, 2023, and 20% after September 30,203 for all other purposes
2. Secondly, there will be NO TCS on International Credit Card spending when you use your card during your trip abroad, even if your spending is above ₹7 lakh.
In case of overseas tour packages, TCS shall continue to apply at the rate of 5% for the first Inr 7 lakhs and 20% rate will only apply for expenditure above this limit post October 1, 2023.
Examples of how the new TCS rules will affect you from 1st October 2023
- If you spend ₹20,000 in US dollars, your bank will deduct ₹4,000 as TCS.
- If your tax liability for the year is ₹5,000, the TCS of ₹4,000 will be adjusted against your tax liability and you will only need to pay ₹1,000 in taxes.
- If your tax liability for the year is ₹3,000, the TCS of ₹4,000 will be adjusted against your tax liability and you will get a refund of ₹1,000.
- If you are not taxable, i.e. your tax liability for the financial year is ₹0, you can claim a full refund of the ₹4,000 TCS charged.
Here is the summary of the TCS update from the Ministry of Finance:
Nature of LRS Payment | Earlier Rate before Finance Act, 2023 | New Rate w.e.f. 1st October 2023 | |
Education financed by loan | Upto ₹7 lakh | 0 | 0 |
Above ₹7 lakh | 0.5% | 0.5% | |
Education not financed by loan/ Medical treatment | Upto ₹7 lakh | 0 | 0 |
Above ₹7 lakh | 5% | 5% | |
Other purposes | Upto ₹7 lakh | 0 | 0 |
Above ₹7 lakh | 5% | 20% | |
Purchase of overseas tour package | Upto ₹7 lakh | 5% (without threshold) | 5% |
Above ₹7 lakh | 20% | ||
What else should you know?
What is the Liberal Remittance Scheme (LRS)?
The LRS is a rule in India that allows residents to send money abroad for different purposes. It was created by the Reserve Bank of India (RBI) in 2004.
Under the LRS scheme, Indian residents can freely send up to $250,000 outside the country each year. This money can be used for education, travel, medical treatment, supporting relatives, investing in foreign stocks, or buying property overseas, etc.
Why is TCS important?
TCS is important for a number of reasons:
- It helps the government of India to collect taxes more efficiently. By collecting tax at the source, the government can ensure that taxes are paid on time and in full.
- TCS helps prevent tax evasion by requiring collectors to collect taxes, the government ensures that individuals can’t avoid paying taxes.
- The amount of TCS collected is credited to your income tax account, which can be used to reduce your tax liability when you file your annual Income Tax Return (ITR).
Is TCS levied by Niyo Global?
NO, TCS is not levied by Niyo Global.
The Government of India collects TCS through various channels, including banks, financial institutions, and government departments. Niyo Global has no role in levying TCS.
Startups and companies are required to collect TCS on payments that are subject to TCS. Failure to collect TCS can result in penalties from the government.
In fact, to throw some more light – Here are some additional details about TCS:
- TCS is applicable to a wide range of payments including international transactions, remittances, purchase of timber, motor vehicle, etc.
- TCS is collected by the collector and deposited to the Income Tax Department.
- Individuals can claim TCS refund/credit when they file their annual Income Tax Returns (ITR).
Organizations or sellers who fail to collect TCS may be subject to a penalty!
Can you claim a TCS refund?
Yes! If you have paid TCS to a bank, you can claim it as a refund or as a credit against your advance taxes. To do this, you will need to file your income tax return and provide the bank’s TCS certificate. The Income Tax Department will then process your refund claim or credit your account.
Here are the benefits of claiming TCS back:
- You can reduce your overall tax liability.
- You can get a refund of the TCS amount that was deducted from you.
- You can avail of credit against your advance taxes.
If you have any questions about TCS, always consult your tax advisor.
How to claim TCS refund?
You can claim a TCS refund under certain conditions. Here are the steps to do it:
- Gather all the necessary documents, including Form 26AS, if applicable.
- Fill up the Refund Claim Form.
- Attach all the essential documents with the Refund Claim Form.
- Submit the Refund Claim Form to the Income Tax Department.
- The Income Tax Department will process it and credit the amount to your bank account.
Note:
You can claim a TCS refund under certain conditions. Here are the steps to do it:
- Date for filing taxes: 1st April 2024
- The IT Department only pays the income tax refund once you have filed the return i.e., Return Filing date. And, the IT department may take more than 15 days to process your income tax refund and the refund will only be processed only if your return is filed with all correctness.
Remember:TCS should not be perceived as an additional spending burden, but rather as a tax mechanism that eventually benefits you when you file returns. It is crucial to understand that the amount collected is not an additional tax liability but an advance payment towards your overall tax liability.
It is important to be aware of this regulation so that you can plan your spending accordingly. If you are subject to TCS, you should be aware of the financial implications & how to claim TCS refund.
Disclaimer: Always consult your tax advisors when filing taxes.
