ITR filing: Sending money outside India? Here is new income tax rule you should know

Every overseas remittance made under the liberalised remittance scheme (LRS) would be subject to a 20%  tax collected at source (TCS) starting 1 July 2023, with the exception of those sent for medical and educational expenses, for which a 5% TCS will be imposed after the threshold of ₹7 lakh is exceeded annually.

20% TCS on foreign remittances under LRS from 1 July. What it means?

From 1st July 2023 onwards any foreign remittance other than for educational and medical purposes would attract TCS at 20%. This would mean that anyone remitting money outside India for the acquisition of a share or property would have to pay an additional 20% of the amount sent outside India. “For example, if someone is sending ₹10,00,000 outside India, then the bank will collect ₹12,00,000 ( ₹10,00,000 as the actual money to be sent and ₹2,00,000 as TCS). This additional amount however shall be available to claim as a tax credit when the sender files his/ her tax return. For example, if the total tax payable for the sender is coming to ₹3,00,000, he now would have to pay ₹1,00,000 as ₹2,00,000 would be claimed as tax credit just like TDS claim,” said Archit Gupta, Founder, and CEO, Clear.

“This policy intends to monitor and restrict high-value international credit card transactions. It will aid India in maintaining its foreign exchange reserves, reducing money laundering, increasing tax revenue, and promoting the submission of more income tax returns. All future income will be subject to increased TDS or TCS at a minimum rate of 20% if you don't submit an income tax return and the TCS from such remittances is ₹50,000 or more,” said Vinit Khandare, CEO and Founder, MyFundBazaar.

Starting 1 July 2023, Tax Collected at Source (TCS) on foreign remittances under LRS has increased, HDFC Bank informed its customers. 

“W.e.f 1 July 2023, Finance Act 2023 has introduced certain changes to the Tax Collection at source (TCS) on Forex drawls/ remittances by Resident Individuals under LRS (Liberalised Remittance Scheme). We request you to make note of the revised TCS rates applicable from 1 July 2023," HDFC Bank mentioned on its website.

HDFC Bank has explained the new provisions on its official website.

Types of Remittances and TCS rate from July 1

1)For education, if the amount being remitted is from a loan obtained from any specified institution as defined in Section 80E: 0.5% TCS will apply on the amount or the aggregate amount over ₹7 lakh per financial year

2) For the purpose of education, other than the above (when the amount is not obtained via education loan) or for the purpose of medical treatment: 5% TCS on the total amount or the aggregate amount over ₹7 lakh per financial year.

3) Overseas tour packages: 20% TCS without any threshold limit of ₹7 lakh per financial year

4)Any other purpose under LRS: 20% TCS without any threshold limit of ₹7 lakh per financial year.

5) Resident Individuals falling under the“Specified Person” category/Non-PAN case/ inoperative PAN case: Double the normal rate of TCS or 5%, whichever is higher. However, the rate will not exceed 20%.

Meanwhile, the income tax department is considering a proposal under which credit card holders will have to file a declaration with the issuer entity within a stipulated time, specifying the nature of expenses incurred in foreign currency for the purpose of TCS levy, PTI reported quoting sources.