- Date : 04/03/2023
- Read: 2 mins
If you are planning to send money abroad, you must know about the tax on sending money abroad from India starting on July 1st, 2023. This article will help you get a better understanding of it.
What is the tax on money transfers abroad?
Nirmala Sitharaman, the finance minister of India, updated the TCS scheme in February 2023. TCS is "Tax Collected at Source." Sending money does not always have to be to a person, as it could also be for investments, buying assets, or even travelling abroad.
The Liberalized Remittance Scheme, commonly known as the LRS, aids an individual in making international transactions efficiently. Before the budget of 2023, the TCS under the LRS was 5% for remittances above 7 lakh rupees.
After the release of the budget for 2023, it has now changed. The TCS for all remittances except for education- and medical-related remittances has changed from 5% to 20%. So, if a person wants to invest 20 lakh rupees abroad, the TCS is 4 lakh rupees. On the other hand, the same amount used for education or medical purposes would have an aggregate amount of 65 thousand rupees for TCS. (Figures and the Example from Fi)
Also read: Foreign Nationals
Why has taxation increased?
The reason behind the increased taxation is uncertain. There are many possibilities as to why the taxes have increased. One of the most logical reasons could be to increase the government’s revenue through tax collection. Another reason could be to motivate Indians to travel more within India rather than abroad. Or, it could be the government’s attempt to ensure that every individual spending money abroad makes it a point to file a return in India.
When Does the Imposition of Taxes Take Effect?
The new TCS taxation scheme would come into force on July 1, 2023. The tax on all the money sent abroad would be 20%. The taxes on the money sent for education- or medically-related purposes would be 5%.
Also read: Tax Center
A remittance is a sum of money sent as a gift. Nirmala Sitharaman, the finance minister of India, has updated the TCS for internationally made transactions. Except for remittances for education and medicine, all remittances would be subject to a 20% tax. This modification will take effect on July 1, 2023.