(Focus on Overseas Tour Package, Education and Medical purposes)
TCS on LRS Remittance
(Finance Act, 2023 : Amendment in TCS Rates)
Finance Act 2023 has amended sub-section (1G) of Section 206C of Income Tax Act,1961 so as to increase the rate of collection of tax at source from “5%.” to “20%” , if it is for a purpose other than for education or medical treatment” w.e.f 1st October 2023.
Finance Act 2023 amended sub-section (1G) of Section 206C to increase the rate of TCS from “5%.” to “20%” , if it is for a purpose other than for education or medical treatment” w.e.f 1st July 2023.
CBDT Circular no 10 of 2023 dated 30th June 2023 issued to defer date of implementation of TCS from 1su July 2023 to 1st October 2023
Proposed Implementation of TCS
Current and Proposed TCS Rates
| Type of Remittance | Present Rate | Proposed Rate (w.e.f 1st October 2023) |
|---|---|---|
| For the purpose of any education, if the amount being remitted out is a loan obtained from any financial institution as defined in section 80E. | Nil upto INR 7 Lakh 0.5% of the amount or the aggregate of the amount in excess of INR 7 lakh. | Nil upto INR 7 Lakh 0.5% of the amount or the aggregate of the amount in excess of INR 7 lakh |
| For the purpose of education, other than above point or for the purpose of medical treatment | Nil upto INR 7 Lakh 5% of the amount or the aggregate of the amount in excess of INR 7 lakh. | Nil upto INR 7 Lakh 5% of the amount or the aggregate of the amount in excess of INR 7 lakh. |
| Overseas Tour Package | 5% without any threshold limit | 5% upto INR 7 Lakh 20% above INR 7 Lakh |
Applicability of TCS on Overseas Tour Package
| Particulars | Details |
|---|---|
| Responsibility of collection of TCS | Seller of Overseas Tour Package |
| Meaning of Overseas Tour Package | The term ‘overseas tour program package‘ is defined as to mean any tour package which offers visit to a country or countries or territory or territories outside lndia and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto As per CBDT Circular, it is clarified that purchase of only international travel ticket or purchase of only hotel accommodation, by in itself is not covered within the definition of ‘overseas tour program package’. To qualify as ‘overseas tour program package’, the package should include at least two of the followings:- (i) international travel ticket, (ii) hotel accommodation (with or without food)/boarding/lodging, any other expenditure of similar nature or in relation thereto |
| Monetary Threshold for applicability and collection of TCS | No Threshold. In CBDT circular no 10 of 2023, it is clarified that for the purchase of overseas tour program package, the threshold of Rs 7 lakh applies to determine the applicable TCS rate as 5% or 20% Therefore, if a Person purchase of Overseas Tour Package for INR 5 Lakhs, he will be subject to TCS at the rate of 5%(No Threshold Limit). If the amount exceeds INR 7 Lakhs, the rate would be 20% |
| Rate of TCS (w.e.f 1st October 2023) | 5% upto INR 7 Lakh; 20% above INR 7 Lakh |
Applicability of TCS on Education and Medical Treatment
| Particulars | Details |
|---|---|
| Responsibility of collection of TCS | On every person who is a Authorised Dealer “Authorised Dealer” means means a person authorised by the Reserve Bank of India under sub-section (1) of section 10 of the Foreign Exchange Management Act, 1999 (42 of 1999) to deal in foreign exchange or foreign security |
| Monetary Threshold for applicability and collection of TCS | INR 7 Lakhs (Aggregate) in a Financial Year In CBDT circular no 10 of 2023, it is clarified that the threshold of Rs 7 lakh for LRS is combined threshold for applicability of the TCS on LRS irrespective of the purpose of the remittance. Therefore, amount used for any purposes, if aggregated of such amount exceeds INR 7 Lakh, then such amount will be subject to TCS |
| Rate of TCS (w.e.f 1st October 2023) For the purpose of any education, if the amount being remitted out is a loan obtained from any financial institution as defined in section 80E*. | Nil upto INR 7 Lakh 0.5% of the amount or the aggregate of the amount in excess of INR 7 lakh. |
| Rate of TCS (w.e.f 1st October 2023) For the purpose of education, other than above point or for the purpose of medical treatment. | Nil upto INR 7 Lakh 5% of the amount or the aggregate of the amount in excess of INR 7 lakh. |
*TCS will be charged at 0.5% instead of 5% if the loan is obtained from a banking company to which the Banking Regulation Act, 1949
Applicability of TCS on International Card Transactions
The Government had notified Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 vide an e-gazette notification dated 16th May, 2023 to remove the differential treatment for credit cards vis i vis other modes of drawal of foreign exchange under LRS. This would mean International Credit card Transactions would be brought under the purview of LRS. Therefore, TCS on LRS would have been applicable.
However, subsequently the Government through press release dated 28th June 2023, has postponed the the classification of use of international credit card while being overseas, as LRS. Therefore, this would mean that transactions through International Credit Cards while being overseas in nature would not be counted as LRS till such further notice and hence would not be subject to TCS
What about TCS Credit ?
TCS deducted as per section 206 will be available as credit in their 26AS which can be used against the tax payable by the assesses in the financial year. The assessee will need to file an Income Tax Return to claim credit of the TCS so collected
Illustration for TCS Calculations in different scenarios
Mr A is a resident Individual has remitted under LRS through AD bank XYZ Bank amounting to INR 7,00,000 for education taken loan from XYZ bank on 5th April 2023. Further, on 5th October 2023, he remitted under LRS through ABC AD bank amounting to INR 7,00,000 for a Medical Treatment and INR 8,00,000 for education taken loan from his relative. TCS implications are as follows
| 5th April 2023 | For purposes of Loan taken from XYZ bank | INR 7,00,000 | NIL | No TCS, as this is in limit of INR 7,00,000 |
| 5th October 2023 | For purposes of Loan Taken from relative | INR 7,00,000 | INR 35,000 | Limit is Combined threshold. INR 7 Lakh limit is already used on 5th April 2023. Also, TCS is Qua remitter and not Qua Authorised Dealer, Therefore, TCS will be applicable, even though money is remitted from different AD Bank. Also, this is out of loan taken not from recognized Financial Institutions, therefore TCS will be applicable at 5%. |
| 5th October 2023 | For purposes of Medical Treatment | INR 8,00,000 | INR 40,000 | Limit is Combined threshold. INR 7 Lakh limit is already used on 5th April 2023. Also, TCS is Qua remitter and not Qua Authorised Dealer, Therefore, TCS will be applicable, even though money is remitted from different AD Bank. Also, this is Medical treatment, therefore TCS will be applicable at 5%. Authorised Dealer. |
