The new rates of tax collection at source (TCS) will come into effect from October 1, 2023. Whether you are going for an international trip, investing in foreign stocks, mutual funds, or crypto currencies abroad, or going abroad for higher studies, you will have to pay TCS if you spend above a certain amount in a financial year. Now, it will be crucial for you to know how much TCS will be applicable on various types of transactions from next month. To make it simpler for you, ET Wealth Online decodes the new TCS regime that is set to kick in from next month.
Under the Liberalized Remittance Scheme (LRS) of the Reserve Bank of India (RBI), you can remit up to $250,000 in a financial year. Starting from October 1, 2023, all overseas outward remittances, except for medical and educational purposes, over a threshold limit of Rs 7 lakh in a financial year will attract a TCS of 20%. Under LRS, there will be no TCS on foreign remittances below Rs 7 lakh spent for educational expenses. If remittance above Rs 7 lakh spent for foreign education is through a loan obtained from an approved financial institution, it will attract TCS at 0.5%. Remittances above Rs 7 lakh spent for educational purposes not obtained through a loan, will attract a TCS of 5%.
Any outward remittance for medical treatment will attract TCS at 5% if the threshold crosses Rs 7 lakh, from October 1, 2023.
Do remember that any remittance for travel and ancillary expenses related to education and medical treatment will attract TCS at the same rate applicable to remittances for education and medical treatment, according to the Ministry of Finance.
There is no relief from TCS on the purchase of overseas tour packages even when the amount is below Rs 7 lakh. On the purchase of overseas tour packages of up to Rs 7 lakh in a financial year, a TCS of 5% will apply from October 1, 2023. Beyond Rs 7 lakh, TCS will be applicable at 20% from next month.