- Date : 23/06/2023
- Read: 3 mins
Learn about the latest TCS rules on foreign spends including tours, education, subscriptions, medical expenses and investments.
- New TCS rules: 20% tax on international credit card transactions exceeding Rs. 7 lakh.
- TCS applies to all foreign spends.
- TCS on overseas tour packages increases to 20% from July 1.
- Claim TCS credits while filing tax returns using the TCS certificate provided by the collector.
Tax Collected at Source (TCS) is a concept that has gained attention recently due to its impact on various international transactions. The Ministry of Finance has announced new rules regarding TCS, and it's important to understand how these rules will affect foreign trips, magazine subscriptions, iTunes purchases, and investments in international equities. In this article, we will clarify some common doubts surrounding TCS and its implications.
New Rule for International Debit and Credit Card Users
No TCS will be collected on international credit card transactions up to Rs. 7 lakh under the Liberalised Remittance Scheme (LRS).
Also Read: TCS To Be Collected On International Credit Card Usage From July 1
TCS on Foreign Currency, and Forex Cards
International spends made through foreign currency and forex cards fall under the Reserve Bank of India's LRS. Until June 30, a 5% TCS will apply to foreign currency remittances. From July 1, the TCS rate will increase to 20% for debit and credit cards on transactions beyond Rs. 7 lakh, while no specific threshold has been specified for forex cards and foreign currency transactions.
Avoiding TCS on Foreign Travel Expenses
If you have already planned your holiday and booked tickets, you can avoid TCS this year by purchasing foreign currency in advance (up to 60 days prior). By purchasing foreign exchange before June 30, you can avoid the 20% TCS that comes into effect on July 1.
Also Read: Here’s Why Your Foreign Travel And Overseas Investment Are Becoming Expensive
TCS on Overseas Tour Packages
Currently, there is a 5% TCS on the purchase of overseas tour packages. From July 1, this rate will be increased to 20%. The responsibility of collecting TCS lies with the customer's card-issuing bank, regardless of the point of purchase.
TCS on Foreign E-commerce Websites and Subscriptions
20% TCS will be applicable when making online payments in foreign currencies for shopping on foreign e-commerce websites or subscribing to international publications.
Tax Collection on International Credit Card Transactions
The details on how the tax will be collected are still awaited. However, it is expected that the TCS will be reflected as an additional charge on the credit card statement for international spends.
TCS on Outward Remittances for Investments
Investments in foreign stocks, bonds, and real estate will attract a TCS of 5% until June 30, and 20% from July 1, 2023.
TCS on Overseas Education and Medical Treatment
For remittances towards overseas education funded through a loan or own funds, a TCS of 0.5% and 5%, respectively, will apply on the amount exceeding Rs. 7 lakh. The same rates apply to remittances associated with medical treatment abroad.
The rules surrounding TCS can be complex, and it is important to stay informed about the latest regulations. To claim TCS credits while filing income tax returns, a TCS certificate provided by the collector should be obtained. This certificate contains the necessary information to claim TCS credits and reduce the overall tax liability.
