As the major tax provision kicks off from next month, one needs to keep a tap on their foreign remittances if any as they will now attract TCS at the rate of 5% subject to riders beginning October 2020.
As per the Finance Act of 2020, funds sent abroad under the RBI’s liberalised remittance scheme is subject to a 5 per cent TCS subject to riders.
The finance bill 2020 had proposed an amendment to section 206C to levy 5% TCS on overseas remittance and for the sale of overseas tour package in February, 2020
Earlier, revenue secretary Ajay Bhushan Pandey explaining the rationale had said, “we have data that shows many persons who transferred funds abroad under this scheme did not file income tax returns. Normally people remitting big amounts should be in the income tax bracket and paying income taxes. Therefore, we have to have this move. And, contrary to misinterpretation in a certain section of the media, 5% TCS on foreign remittance is not an additional or new tax. It is like TDS which you can adjust against your total income tax liability.”
It is worth noting that the government has offered some carve-outs so that not every overseas remittance will be subject to TCS.
Firstly, if the remitted amount is less than Rs. 7 lakh then TCS on foreign remittance shall not apply
Secondly, foreign remittance shall not apply for tour packages. However, if the purpose is not for buying a tour package then for any amount above this threshold, TCS shall apply.
Thirdly, for students, TCS at the rate of 0.5% shall be charged for remittance made over Rs. 7 lakhs.
Lastly, in case the person is subject to TDS under the income tax Act then the provision of TCS shall not apply.
The Finance Act notified on March 27 made these provisions applicable from October 1. Many financial institutions have communicated the applicability of TCS on remittances from October to customers.
Subscribe Taxscan Premium to view the Judgment
