The July Vs October Conundrum: New Government TCS Guideline Released

A look at the new TCS rate and applicability-related information as clarified by the government in its recent guideline

TCS Rate Guidelines
  • The government provided a fresh update on TCS
  • This TCS information is relevant for people paying under LRS or on overseas tour packages
  • Overseas use of international credit cards is kept outside LRS for now
  • The conditions for educational, medical and travel expenses have been clarified

The Ministry of Finance recently released a guideline on Tax Collected at Source (TCS) applicable to foreign remittances. The guidelines are applicable to foreign remittances under the Liberalised Remittance Scheme.

Also Read: New TCS Rules: 20% TCS on Foreign Remittances From July 1, 2023

Tax Collected at Source

TCS is the tax liability to be paid by a seller, which the seller collects from the buyer at the time of the sale. The Income Tax Act has specified the list of goods on which TCS is collected. 

This includes consumable alcohol, timber, tendu leaves, parking lot tickets, minerals, bullions of more than Rs 2 lakhs, jewellery of more than Rs 5 lakhs, motor vehicles above Rs 10 lakhs, etc.

The seller collecting the TCS may be government, government bodies, companies, partnerships, cooperatives, Hindu Undivided Family or individuals.

Also Read: Shocking Secrets Of The New TCS Amendments Revealed

Excerpts from the Clarification

  • In this year’s budget, changes in TCS on payments under the LRS and on overseas tour programme packages were announced. These changes were meant to be effective from 1 July 2023. It is now clarified that there will be no changes in the TCS rate for all LRS and tour packages and under all modes of payment. This is applicable for payments up to Rs 7 lakh per individual per annum. 

  • Beyond the threshold of Rs 7 lakh, the TCS rates are,

    1. 0.5% on education-related remittances that are financed by an education loan

    2. 5% on medical treatment or other educational payments

    3. 20% for any other payment category

    4. 5% on overseas tour program for the first Rs 7 lakh, and 20% thereafter

  • The government has decided to give more time to banks and card networks to implement the required IT solutions. Till then, overseas transactions made through international credit cards will not be considered under LRS and hence not subject to TCS. With this, the government’s earlier notification issued on 16 May 2023 is superseded.

  • The increased rates of TCS will be applicable from 1 October 2023 instead of 1 July 2023. It is worth noting that the two major changes are –

    1. LRS payment of more than Rs 7 lakhs for other purposes has a TCS rate of 5%. It will become 20%

    2. The overseas tour programme has a TCS rate of 5% without a threshold. Now it will have 5% TCS till Rs 7 lakhs, and 20% beyond it

Also Read: Need Clarification On TDS And TCS? Check Out The Difference Between The Two 

Other Clarifications

A few other pieces of information that you must know are:

An overseas tour programme payment must have at least two of the following – i) the international ticket(s), ii) hotel accommodation that may or may not include food and stay and iii) any other expenditure

Educational remittance can include payments made for i) tickets between India and the study destination, ii) tuition and related fee payments to the university/institute, iii) Other daily expenditures

Remittances for medical expenses shall include – i) the patient and attendant’s ticket between India and the destination, ii) medical expenditure, iii) other daily expenditure

People making foreign payments will have to keep the higher TCS rates in mind after October. However, it will not impact the small-ticket payments as the threshold will protect them from the higher rate.

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Also Read: TCS on Foreign Travel Booked With Credit Cards Hiked To 20%. Can You Avoid It? 

Disclaimer: This information should not be considered investment or legal advice and is only meant to provide general information. When concluding, you must seek independent advice separately.


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