New TCS from 1st October 2023 for various foreign remittances:
1. Educational Purposes: When it comes to foreign remittances for educational purposes, there is no Tax Collection at Source (TCS) applied if the amount being sent is below Rs 7 lakhs. However, if the remittance for education exceeds Rs 7 lakhs, a nominal TCS rate of 0.5% comes into effect. It’s important to note that if the remittance for education is not funded by a loan, a slightly higher TCS rate of 5% is charged. This ensures that larger educational expenses exceeding Rs 7 lakhs are subject to a reasonable TCS.
2. Medical Purposes: For remittances intended for medical purposes, a 5% TCS is collected if the amount crosses the threshold of Rs 7 lakhs. The Ministry of Finance has clarified that the rate of TCS remains consistent for all travel and ancillary expenses related to both medical and educational treatments. This means that expenses such as hostel fees for a child studying abroad can also be considered as funds remitted for medical purposes.
3. Foreign Tour: Currently, foreign tour packages are subjected to a 5% TCS without any specific threshold limit. This applies to the entire cost of the tour package. However, starting from October 1, for purchases of overseas tour packages up to Rs 7 lakhs in a financial year, a TCS of 5% will continue to apply.
When the total cost of the tour package surpasses Rs 7 lakhs, a higher TCS rate of 20% will be applicable. This significant increase in TCS aims to regulate outward overseas remittances, including various expenses like bank account transfers, forex card loading, foreign exchange, travel expenditures, and business trips.
4. Investments: Regarding investments made abroad, such as purchasing stocks, mutual funds, and cryptocurrencies, a TCS rate of 20% will be applicable if the investment amount exceeds Rs 7 lakhs. However, if the investment falls below this threshold limit, no TCS will be imposed.
This exemption encourages smaller-scale investments. It’s crucial to understand that if one invests in domestic mutual funds that have exposure to foreign stocks, it will not be considered as remittance under the Liberalised Remittance Scheme (LRS) and. therefore, will not be subject to TCS.
5. Credit Card Transactions: Credit card transactions are not governed by the Liberalised Remittance Scheme (LRS). Therefore, they do not fall under the purview of TCS.
However, it’s essential to distinguish between payment modes: debit cards and forex cards do come under LRS regulations. Whether TCS is charged on these cards depends on the specific purpose of the transaction.
