After a delay of three months, higher rates of Tax Collection at Source (TCS) on foreign remittances are set to become applicable from Sunday, 1 October.
The government had announced the raising of TCS from 5 to 20 percent on foreign remittances under the Liberalised Remittance Scheme (LRS) in May this year.
While the policy was supposed to come into effect on 1 July, it was postponed by three months to 1 October after several customers expressed their dismay and banks asked for more time to adjust their systems to the hike.
What kinds of expenditures will attract higher TCS? Higher TCS rates will apply on various kinds of foreign spending, including international tour packages and foreign travel for medical treatment, business, and pilgrimage. The hike will also apply to personal gifts, donations, investments and family donations.
Under the scheme, individuals can remit upto $250,000 in a financial year.
What kinds of expenditures will not attract higher TCS? TCS will not apply on credit card transactions abroad. In a communication to account holders, HDFC Bank said that LRS has been "postponed" for the use of international credit cards. "Therefore, no TCS shall be applicable on expenditure through international credit card while being overseas till further order," the communication stated, as per The Indian Express.
Further, for education – where the source of finance is a loan – no TCS will be applicable for less than Rs 7 lakh per individual per annum. For an amount equal to or exceeding Rs 7 lakh, TCS will apply at the rate of 0.5 percent.
For education – where the source of finance is self-funding – no TCS will be levied on amounts less than Rs 7 lakh. However, for amounts equal to or exceeding Rs 7 lakh, TCS of 5 percent will apply.
Travel agents' body urges govt to abolish TCS: While the scheme is supposed to come into effect within a matter of days, the Travel Agents Association Of India (TAAI) has written to the government, urging them to abolish their decision or postpone the scheme's implementation until the next fiscal year.
TAAI chief Jyoti Mayal, in a letter to Finance Minister Nirmala Sitharaman, said that TCS will prove to be a big challenge for the travel fraternity and would lead to a lot of travel-related business being diverted abroad.
She further said that Goods and Service Tax (GST) was already a heavy burden on Indian tour operators, and that the introduction of TCS would bleed their finances further.
(With inputs from The Indian Express and PTI.)