What is the effective date of implementation of the new proposed Tax Collected at Source (TCS)?

From October 1, 2023, 20% Tax Collected at Source (TCS) provision on all forex transactions & outward remittances beyond 7 Lakhs (Except for Education and Medical Purposes) will be implemented.

What transactions will be impacted by this new TCS provision?

All forex transactions and/or remittances (other than for education and medical purposes) in a financial year done under the LRS will be liable for 20% TCS over a threshold limit of Rs 7 lakhs. Forex transactions below Rs 7 lakh in a financial year will not be subject to Tax Collected at Source (TCS). The TCS on remittance for education and medical treatment is still the same i.e. 5%, and 0.5% for remittances, where funds for education have come from a loan. Forex transactions done for business/corporate travel do not fall under the LRS and will not be subject to any tax collected at source (TCS).

Will GST be applied to the Tax collected at source (TCS)?

No, GST will not be applied to the tax collected at source (TCS). The amount debited from the buyer’s account or received by the seller shall be inclusive of VAT/excise/GST. As a result, the TCS should be inclusive of GST.

What are the different remittance purposes for which TCS is applicable?

The TCS will apply to all remittance(s) out of India that fall under the Liberalized Remittance Scheme (LRS) of RBI. Funds can be transferred for a variety of purposes such as tuition fees for university, medical expenses for a family member, living expenses of a close relative, sending money abroad to friends living there, etc. It is only the TCS rate that differs based on the purpose.

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