Foreign remittances to be taxed more from July 1, Where to impact?
Foreign remittances to be taxed more from July 1, Where to impact?

Foreign trip or investing abroad, will cost more starting on July 1 due to the implementation of ‘tax collected at source” (TCS) on foreign remittances. Finance Minister Nirmala Sitharaman stated in the Union Budget for 2023–24 that all outgoing remittances, save those for medical and educational expenses, will be subject to a TCS of 20% of the whole amount.

The increase in tax collected at source rate under the Liberalised Remittance Scheme  is basically aimed at high value discretionary spending. These will cover payments for foreign tours, purchasing foreign currency, sending gifts to friends or relatives abroad and buying foreign stocks among others. In case of education related expenses for students studying abroad, if a parent is able to establish that the amount is for education purpose, then the TCS will be 5%, in case the aggregate amount is more than Rs 7 lakhs. If the amount is for tution fees or hostel expenses, then it is easier to establish the education link, but not if the student is living in a rented accommodation away from the campus while studying abroad. If the education link can't be established, then TCS of 20 per cent without any threshold limit will have to paid.

For those sending money overseas for any purpose other than for education and medical treatment, TCS will be payable at 20% on the total amount. Earlier, it was 5% only on the amount exceeding Rs.7 lakh. So, if you plan to remit Rs.8 lakh abroad towards buying foreign stocks or for maintenance of relatives abroad, a TCS of Rs.1.6 lakh will be payable. Earlier, this would have attracted a TCS of Rs.5,000 only (5% on amount exceeding Rs.7 lakh).

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