Union Budget 2023 includes some significant updates on forex transactions and outward remittances. Under the Liberalized Remittance Scheme (LRS), a new Tax Collected at Source (TCS) will apply on forex transactions and outward remittances, starting October 1st, 2023.
Learn more about the new Tax Collection at Source (TCS) and how BookMyForex can help you adjust it.
Q1. What is the effective date of implementation of the new Tax collected at source (TCS) amendments?
A: As per clause 206C of the Income Tax Act in sub-section (1G), a new TCS (Tax Collected at Source) slab will be implemented from October 1 2023 for all the outward remittances under LRS as per the FEMA Act 1999.
Q2. What kind of tax is TCS?
A: Tax Collected at Source (TCS) is a tax collected from a customer at the time of Sale of any forex product for all purposes covered under LRS. However, TCS is not an additional tax and can be adjusted against your total income tax liability & claimed while filing tax returns. Salaried persons may also be able to adjust the amount of TCS from payment of their TDS deduction by their employers.
Q3. What is the TCS taxation rate and which transactions will be affected?
A: All forex purchases and remittances (other than for education, medical and business/ commercial purposes) over a threshold limit of Rs 7 lakhs in a financial year executed under the LRS will be liable to be deducted @20%, starting Oct 1, 2023. The TCS for education and medical treatment is still the same as the current i.e. 5% or 0.5% where the source of funds for the remittance is an education loan from an authorized financial institution). No TCS is applicable to business/ commercial transactions.
Q4. Can I get my TCS amount back?
A: Yes, most certainly. Unlike TDS, Tax Collected at Source (TCS) can be adjusted while filing tax returns.
Q5 Can I adjust my TCS tax liability without waiting until the end of the financial year?
A: Yes, if you are an individual taxpayer, you can claim TCS and have it adjusted as an advance tax payment. You can also adjust it against your total income tax liability while filing returns. BookMyForex will share an automated TCS certificate with the customers on their registered email id, so business owners can adjust tax in advance tax payment. Salaried individuals, may also be able to adjust the Tax Collected at Source (TCS) from TDS deductions. This is however subject to the employer’s perception of genuine TCS-paid claim and if the same can be verified on the income tax portal.
Q6. Will TCS on foreign remittances through Liberalized Remittance Scheme (LRS) be applicable on the entire amount of remittance or only on an excess of Rs 7 Lacs?
A: An Official notification from the Finance Ministry released on June 28, 2023 clarifies that a threshold of Rs 7 lakhs for TCS shall be restored for all categories of LRS payments, regardless of the mode of payment. So, TCS will be applicable only to the amount in excess of Rs 7 lakhs in a financial year.
Q7. What are the different products for which tax collection is applicable?
A: The tax at source (TCS) will be applicable to all forex purchases/ outward remittance(s) under the Liberalized Remittance Scheme (LRS) as per FEMA Act 1999, which includes the purchase of foreign currency notes, Forex Cards, outward remittances and also for payments made for purchase of overseas tour packages.
Q8.TCS was previously not applied to international credit card spends. Does that still apply?
A: The latest notification issued by the Finance Ministry states that international credit card spends will not attract Tax Collected at Source till further notice.
Q9. How much TCS will be applied in the case of Non-PAN transactions?
A: LRS transactions without PAN are not allowed.
Q10. Will GST be applied to the Tax collected at source (TCS)?
A: No, GST will not be applied to the tax collected at source (TCS).
Q11. What if the customer bought forex of Rs. 10,00,000, paid TCS, and then encashed Rs. 5,00,000? Will the TCS be refunded or will apply again?
A: TCS is applicable only upon the purchase of forex or outward remittance ONLY.
Q12. What if a customer bought a tour worth Rs. 6,00,000 and now wants to remit forex worth of Rs. 2,00,000, what will be the percent of TCS charged?
A: TCS shall be applicable to all categories of LRS payments, regardless of the mode of payment. If the amount of tour package/forex purchase/forex remitted out of India exceeds Rs 7 lakhs, TCS will be charged at 20% rate. In this case, 20% TCS will be applicable on 1 lakh i.e. Rs 20,000.
Q13. Is there any change in the tax implication on remittances for the purpose of overseas education?
A: For remittances done for the purpose of overseas education, 5% TCS will be applicable on the amount being remitted in excess of INR 7 Lacs. The same would 0.5% in the cases of the amount remitted originates via an education loan from a financial institution as defined under Section 80E of the Income Tax Act.
Q14. What is the tax implication for remittances to foreign tour operators under LRS?
A: Any amount remitted to foreign tour operators exceeding Rs 7 lakhs in a financial year will be charged 20% TCS from Oct 1, 2023.
Q15 Will TCS (Tax Collected at Source) be applicable if a foreign exchange facility is availed in Cash or Forex cards?
A: TCS at 20% is applicable from 1st July 2023 for the purchase of foreign currency cash or forex pre-paid cards over a threshold limit of Rs 7 lakhs in a financial year, starting Oct 1, 2023. Purchase of currency or forex card below Rs 7 lakh in a financial year will not be subject to Tax Collected at Source (TCS)
Q16. How can customer raise their request to BookMyForex for getting TCS certificate?
A: BookMyForex will fast-track issuance of TCS and will without asking send out automated TCS certificates to all its customers.