Key Points
It was in 2020, when the levy of tax collected at source (TCS) was first introduced in the Legislature, under sub section (1G) of section 206C of the Income Tax Act, on foreign remittances made under the Liberalised Remittance Scheme (LRS), and on Overseas Tour Packages, including overseas travel, hotel, lodging and boarding expenses...
The Union budget 2023 has increased the TCS rate on foreign remittances made under LRS (other than medical treatment and overseas education), like investments in shares, bonds and securities abroad, donations, gifts, and living expenses of relatives abroad, and on overseas tour packages, from the existing 5% to 20%, w.e.f. 1 July, and there is no threshold exemption limit in respect of such remittances..
The TCS rate of 5% is applicable on LRS spends made directly to the foreign medical or educational institution towards their fees, and also on indirect travel and incidental expenses related to education and medical treatment abroad, subject to the furnishing of documentary evidences. 16 May, international credit card payments, made by resident individuals, on foreign visits, are also counted in the threshold permissible LRS limit of $250,000 per year..
So, if a resident individual is making LRS spends through more than one authorised dealer or banker, or more than one international debit or credit card, then the threshold exemption limit of 7 lakh in a year, will be considered in respect of all such authorised dealers or bankers or debit or credit cards, taken together, and not per authorised dealer, or banker, or debit card, or credit card, independently..
The remittances of Mr. Srinivasan of 3 lakh for investing in US Stocks and overseas tour package of 4 lakh, will be liable for TCS collection at 20% i.e., 60,000 and 80,000 by the investment banker and tour operator, respectively, either at the time of remittance or at the time of debiting the amount payable, whichever is earlier, and without any threshold exemption limit..
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