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written by | May 9, 2022

TCS for Foreign Remittance According to ITR 1961

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Individuals will be taxed at source for international remittances sent through the Liberalised Remittance Scheme (LRS) and for purchasing foreign trip packages beginning October 1, 2020. TCS or Tax Collected at Source will be imposed on these transactions/payments if they exceed certain thresholds, defined under section 206C (1G) of the Income-tax Act, 1961. The Finance Act of 2020 levied TCS for foreign remittance on certain transactions. On the other hand, individuals can claim credit for TCS when filing their income tax returns, in a similar way to TDS or tax deducted at source.

Did you know?

New section 206 (1H) was introduced in October 2020 to collect TCS from the buyers of goods who make a payment of more than 50 lakhs towards sale consideration in the current FY.

Also Read: TCS under section 206(1H) of Finance Act, 2020: Impact on e-Invoicing under GST

Understanding TCS on Foreign Remittance Section – SBNRI

New revisions to the Finance Bill, 2020 have been introduced, which is good news for investors that trade in global stock markets. In Section 260C of the Income Tax Act 1961, the Financial Act 2020 added Subsection (1G). The Finance Act included a provision to collect tax on remittances. Money remitted outside India under the Reserve Bank's Liberalised Remittance Scheme would be subject to a 5% TCS on the foreign remittance section. The new income tax rule went into effect on October 1, 2020.

This will affect incoming fund transfers to your international investment account, and the rate will be applied to remittances of more than ₹535 lakhs in a fiscal year. Residents of India can remit/send up to ₹191 lakhs per year under the LRS for medical treatment, gifts, maintenance of family abroad, overseas education, real estate, stock and bond investments.

Every quarter, the bank will issue TCS certificates. TCS returns will be filed every quarter, according to the due dates outlined in the Income Tax Act and as needed. According to the current time constraints, TCS certificates must be given within 15 days of the due date of quarterly TCS returns.

The originally collected TCS will not be repaid in the event of a transaction reversal that results in a refund of the transaction amount unless the reverse occurs on the same day as the original transaction. However, the cardholder can claim TCS credit for any tax paid by the bank (but not returned) when filing their income tax return, subject to applicable income tax restrictions.

TCS on Foreign Remittance for Education

Because tax is now collected at source (TCS) if the remittance amount exceeds ₹7 lakhs, the ambition of earning a foreign degree has become a faraway one for outstanding students. If the money is sent from a financial institution, the TCS rate will be 0.5% (0.375% until March 31, 2021), but if it is sent from any other source, the rate will be ten times higher, or 5% (3.75% until March 31, 2021).

How Does TCS on Foreign Remittance Work?

When you move funds overseas under the LRS system after October 1, 2020, your authorised dealer (the bank facilitating the foreign exchange) will collect a 5% tax on the fund transfer's value in a financial year. The TCS shall be collected either when the amount for remittance is received or when the amount payable is debited, whichever comes first. TCS for foreign remittance will only apply to amounts above ₹7 lakhs in a financial year, rather than the overall amount.

Only the sum over ₹7 lakhs is subject to a 5% TCS deduction. For example, if you send ₹15 lakhs in FY 2021, 5% of the amount above the present barrier of ₹8 lakhs will be deducted, and TCS will be removed in the amount of ₹40,000.

Any remittances received in FY 2021 will be counted towards the ₹7 lakhs mark. If you transfer ₹5 lakhs before October 1, 2020, and then another ₹10 lakhs after that, the 5% TCS will be calculated on ₹8 lakhs (₹15 lakhs minus ₹7 lakhs). TCS will be deducted at 5% of the total amount, or ₹40,000. There will be no need to pay any back-dated TCS.

Rate of TCS on Foreign Remittance

Usually, all transfers out of India via the RBI's LRS, where the remitter's PAN or Aadhaar has been provided, and the remitter's total remittance amount exceeds ₹7 lakhs in a financial year, are subject to a 5% tax. Please note that the rate of TCS will be 0.5% on amounts submitted to pursue education through a loan received from any specified financial institution in India (covered under sec. 80E of the Income-tax Act, 1961).

  • 5% TCS on international remittances.
  • 0.5% TCS on international remittances for education.
  • 10% TCS if the buyer does not provide a PAN number.
  • In the case of an NRI or a foreign corporation, a surcharge and a health and education cess will be imposed.

Particulars

Rate

If PAN is not submitted

Remittance in excess of 7 lakh

5%

10%

Remittance funded by education loan

0.5%

5%

TCS collected for remittance under the Liberalised Remittance Scheme (LRS) will not be subject to GST. However, on currency conversion and remittance service charges, GST will continue to apply.

Also Read: Everything You Need to Know About the New Income Tax AIS

How can NRIs Save TCS on Foreign Remittance?

Repatriation refers to the transfer of funds by NRIs or PIOs from their NRO account balance to an NRE account or an offshore bank account. Per financial year, funds from an NRO account can be repatriated up to ₹764 lakhs. TCS is not applicable on money transmitted from an NRO account to an NRE/foreign account by NRIs under Section 206C (1G).

As a result, NRIs can easily send their Indian earnings, such as pensions, dividends, salaries, rents, investments and profits from businesses eligible for repatriation and distributions from any deposit using their NRO account.

How can SBNRI Help NRIs Save TCS on Foreign Remittance?

SBNRI is a unique online platform that provides NRI consumers with various online banking and investing products and services. NRIs can save, manage and repatriate their Indian income by opening an NRO account online. Furthermore, NRIs do not require certification of documents from the Indian Embassy to open an NRI account.

Under What Scenarios TCS will not be Applicable?

TCS is not applicable if the overseas remittance suggested by the customer under LRS is subject to TDS deduction and the customer makes TDS. For instance, if a resident Indian (remitter) wishes to transmit monies to an overseas account for rent/sale proceeds to a non-resident Indian, the remitter will deduct TDS by section 195 of the Income Tax Act. The remitter will submit the 15 CA/CB. The remitter pays a fee for consulting services to a corporation in another country. The remitter deducts TDS and sends the remainder of the monies. The remitter must submit 15 CA/CB.

Conclusion

In Budget 2020, the government adopted three TCS measures: levying TCS on international remittances, travel packages abroad and product sales. The government has taken a dramatic step to control a disorganised group that does not pay taxes. However, the new amendment is unaffected because the TCS amount can be claimed back at the end of the year. These new restrictions have been put in place to combat tax evasion, trace the flow of money in the Indian economy, and inspire people to file their income tax returns.
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FAQs

Q: Is a tax on remittance to be paid in India?

Ans:

It is legal to send money to your parents in India, and they will not be subject to any taxation on the sum sent to them in this manner. However, if they choose to invest this money, their income will be subject to tax in their respective jurisdictions.

Q: What is the TCS tax as an example?

Ans:

If a customer acquires a car that costs  ₹10.01 lakhs, a tax of  ₹10,010 would be charged as TCS foreign remittance on the purchase. You should submit this sum to a certain bank branch that the government has granted authority to accept payments of this nature.

Q: How can I claim TCS on foreign remittance in income tax?

Ans:

Every tax collector must file a quarterly TCS return, which is in the form of Form 27EQ, in respect of the tax that they have collected during a specific quarter. You should pay the interest accrued due to the delay in TCS payment to the government before filing the return.

Q: Can TCS on remittance be claimed in ITR?

Ans:

You can claim TCS credits earned throughout the year in your ITR like that used for TDS credits. To claim the TDS credit in ITR-1, which is available on the internet platform, enter the necessary information in part under "Tax details."

Q: Can I claim TCS for foreign remittance?

Ans:

Foreign cash withdrawals made through ATMs, point of sale (POS) or e-commerce and transactions made on foreign merchants' or e-commerce sites that allow Dynamic Currency Conversion (DCC) transactions will be subject to the TCS.

Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.
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Disclaimer :
The information, product and services provided on this website are provided on an “as is” and “as available” basis without any warranty or representation, express or implied. Khatabook Blogs are meant purely for educational discussion of financial products and services. Khatabook does not make a guarantee that the service will meet your requirements, or that it will be uninterrupted, timely and secure, and that errors, if any, will be corrected. The material and information contained herein is for general information purposes only. Consult a professional before relying on the information to make any legal, financial or business decisions. Use this information strictly at your own risk. Khatabook will not be liable for any false, inaccurate or incomplete information present on the website. Although every effort is made to ensure that the information contained in this website is updated, relevant and accurate, Khatabook makes no guarantees about the completeness, reliability, accuracy, suitability or availability with respect to the website or the information, product, services or related graphics contained on the website for any purpose. Khatabook will not be liable for the website being temporarily unavailable, due to any technical issues or otherwise, beyond its control and for any loss or damage suffered as a result of the use of or access to, or inability to use or access to this website whatsoever.