Foreign costs more for sending money. Parents shall have more money because tax collection at source (TCS) for foreign Remittances increases from 5% to 20%. Under LRS (Liberalized Remittance Scheme), from 5% to 20% has been increased in Union Budget 2023 at Source (TCS) on foreign Remittance. The TCS rule applies to Sending money abroad, foreign tours, and except for medical and educational purposes. This new rule will be applicable from July 1, 2023.
Under LRS, 0.5 per cent TCS is applicable on the Remittance made for foreign education through an education loan paid abroad for above Rs 7 lakh. This rule will not be going to change in any case. Although if the money sending not for an education loan, then the money remitted even for education attracts TCS at 5% on above Rs 7 lakh.
Key changes for Tax Collection at Source:
Remittance using Education Loan Under Section 80E
If the amount sent overseas is a loan from any financial institution, as described in section 80E, 0.5 per cent of the total amount above 7 lakhs in a financial year.
Remittance for education and medical:
If the amount is being sent overseas for medical and education, in a financial year, 5 per cent or aggregate of the amount above 7 lacks.
Remittance for overseas tour Package
Initially, this amount was 5%. It means if your tour package is equivalent to 5 lakhs, then a TCS of 25,000 will be applicable. After implementing the new rule, this limit changed to 20%. It means a TCS of 1,00,000 will be applicable on a tour package of 5 lacks.
Remittance for all other cases/ purposes:
Initially, this limit was 5 per cent or an aggregate amount above 7 lacks. This means a TCS of 15,00 will be applicable on the amount equivalent to 10 lakhs.
After implementing the new rule, the limit is changed to 20 per cent without any changes. This means a TCS of 2,00,000 lakhs will be applied to the amount equivalent to 10 lakhs except for education and medical purposes.
In some cases, if parents want TCS at 5 per c, they must provide proof of education.
For Example-
At a 20 % rate, a TCS of Rs 20000 will apply to Rs 100000. If an individual has a tax on the total income is Rs 50000, he has to pay Rs 30000, and Rs 20000 will be adjusted against the TCS balance.
Please remember that TCS is a tax paid on the transactions, not a tax. Against the tax liability of the taxpayer, TCS can be adjustable. An increase in TCS has impacts on cash flow. The TCS amount will be refunded or deducted to the taxpayer after filing the ITR.
Comentários