Higher Rate of Tax collection at source on foreign remittances @ 20%




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Higher Rate of Tax collection at source on foreign remittances @ 20%

 

 

Query 1]

I have a question about interest on PPF accounts. Whether it will be tax free or not if opted for a new tax region? Please advise.

 

  

Opinion:

  1. Though most of the exemption and deduction is not available to the taxpayers opting for the new tax regime, this is not so with PPF interest.
  1. PPF Interest income is tax free whether the taxpayers opt for the new tax regime or the old tax regime.

Query 2]

I will be grateful if you kindly educate your readers about the provisions in the 2023-24 Budget of TCS on all foreign remittances, including payments through credit/debit cards. Does it mean that whatever the amount of payment in foreign currency is involved, e.g., for booking air/hotel charges abroad, one is now required to pay TCS @20% which can be claimed as refund only after filing the IT return? A middle-class retired person like me booking tickets to visit his daughter abroad will require paying a tidy amount of his savings as TCS which will be reimbursed after one year once he files his IT return. This is both harsh and unfair on honest tax payers.

 

Opinion:

  1. Earlier, Tax Collection at Source (TCS) @ 5% was applicable on all foreign remittances (other than for education funded by an education loan wherein TCS rate was 0.50%) that exceed Rs 7 lakh. There was no TCS on remittances below Rs 7 lakh.
  1. Budget 2023 has removed the threshold of Rs 7 lakh for all purposes other than education and medical treatment. Now, all foreign remittances under the Liberalised Remittance Scheme (LRS) will face a TCS @ 20%. However, if the person remitting establishes that the money has been sent for education purposes or medical purposes then the TCS will be required to be done @ 5%. TCS rate shall be 0.50% if the remittance is for education purpose and is funded by taking the education loan from specified entities.
  1. Credit card payments for foreign travel have been brought under the purview of the Liberalised Remittance Scheme (LRS) of the Reserve Bank, to ensure that such expenses do not escape TCS.

Even though the TCS is not a tax by itself & it is adjustable or refundable at the time of filing income tax return, it is sure to result in the blockage of the fund of the taxpayers. This move to enhance the TCS Rate to 20% is definitely a big blow on the citizens. Only relief could be to the parents and students remitting the sum for education or for the person remitting the amount for medical purposes. However, they’ll still be impacted to an extent as they would need to prove by documentation that their remittance is for education purposes. Otherwise, they won’t be able to avail the discounted and concessional TCS rates for the same.

Query 3]

I have a small query on taxation of sale-proceeds of agricultural land. This agricultural land is located in a rural area, in a village outside the municipal limits where the population is less than 9,000. It was purchased in December 2010 at a total consideration of Rs. 4.36 lakh. Now, there is a buyer for this land who is prepared to purchase at a total consideration of Rs. 220.00 Lakh. Whether the proceeds of this proposed sale will attract any tax liability such as Income Tax or Capital Gains Tax? The proposed sale is being contemplated after retaining the property for about 13 years from its purchase. Please enlighten me in this regard.

 

Opinion:

Income arising on sale of agricultural land is totally tax free provided that

(a) it is rural agricultural land & (b) it is used for agricultural purposes.

Rural Agricultural Land:
Rural agricultural land is not considered as “Capital Assets” & hence no tax is payable on sale of Rural Agricultural Land. An agricultural land is considered as rural agricultural land if it is not situated in any area within the distance (measured aerially) of not more than:

a] 2 Kms, from the local limits of any municipality or cantonment board and which has a population of more than 10,000 but not exceeding 1,00,000; or

b] 6 Kms, from the local limits of any municipality or cantonment board and which has a population of more than 1,00,000 but not exceeding 10,00,000; or

c] 8 Kms, from the local limits of any municipality or cantonment board and which has a population of more than 10,00,000.

Above benefit of tax exemption is not available to profit arising on sale of (a) urban agricultural land or (b) non-agricultural land.

 

 

Agricultural Usage:
Use of rural agricultural land for agricultural purposes is one of the criteria for claiming income as exempt. The revenue records and other documents should reflect the land usage as such. Agricultural income in the earlier ITR provides additional evidence in support of the usage of land for agricultural purposes.

In your specific case, it appears that the agricultural land you are proposing to sell is rural agricultural land. If it is so, the entire amount of gain would be free from income tax.

Query 4]

Limit for Senior Citizens Saving Scheme (SCSS) has been raised from Rs. 15 lakhs to Rs. 30 lakhs? When will it become effective? 

 

Opinion:

  1. The limit Senior Citizens Saving Scheme (SCSS) has been raised from Rs. 15 lakhs to Rs. 30 lakhs by the Budget-2023.
  1. The revised limit is applicable w.e.f. 1stApril 2023.

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—

Regards,
CA Naresh Jakhotia
Partner – M/s. SSRPN & Co.
10, Laxmi Vyankatesh Apartment
Telephone Exchange Square
Central Avenue Road
Nagpur-440008.

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