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The Ministry of Finance announced in a notice on June 28, 2023 that the new Tax Collection at Source (TCS) rule will take effect on October 1, 2023. The hike in TCS rates, which was scheduled to take effect on July 1, 2023, will instead begin on October 1, 2023, with the revision described in (ii) above, according to the ministry. It said, “Earlier rates (before to change by the Finance Act 2023) shall continue to apply until September 30, 2023. Except in specific circumstances, the Tax Collection at Source (TCS) rate on overseas remittances sent under the Liberalised Remittance Scheme (LRS) has been increased by the Budget 2023 to 20% from the previous rate of 5%. Beginning on July 1 2023, TCS’s increased rate would become effective.
A person may submit up to $250,000 under LRS in a fiscal year. According to Rule 5 of the Foreign Exchange Management (CAT) Rules, 2000, one may send money abroad for expenses like travel, business trips, moving abroad for employment, education, or medical reasons, making gifts or donations, emigrating, or maintaining close relatives. All overseas remittance transactions that fall under LRS are now subject to TCS. However, TCS’s charges change based on the type of transaction.
Beginning on October 1, 2023, 2023, TCS will be applied to all overseas outgoing remittances (bank account transfers, foreign exchange, loading forex cards), excluding those made for medical and educational purposes and those associated with international travel packages.
International credit card expenditures were brought under LRS of the Reserve Bank of India (RBI) earlier in May, according to the Ministry of Finance. TCS of 20% will only be applied to individual payments made with debit and credit cards in a fiscal year beginning on July 1, 2023, if they exceed Rs 7 lakh.
In and of itself, TCS is not a tax. When submitting an income tax return, it will be subtracted from the tax on income.
