5% tax on foreign fund transfer from October 1
Indian students studying abroad, Indian tourists going abroad and Indian investors investing in stocks, bonds, and property abroad will be impacted by this tax
New Delhi: Starting October 1, people making foreign remittances got to concentrate on their tax collected at source (TCS) liability.
The Reserve Bank of India’s (RBI) liberalized remittance scheme (LRS) allows a private to remit up to $250,000 per annum. the supply to gather tax on remittances was introduced within the Finance Act 2020.
Payments for foreign tour packages also are subject to the 5 percent TCS, with none exemption threshold. The tax goes into effect from October 1, 2020.
At what rate is it levied and exclusions?
TCS applies just one occasion aggregate remittances exceed Rs 7,00,000 during a financial year. it's levied at 5 percent, however, if you are doing not provide PAN or Aadhar, to the Authorised Dealer, TCS is going to be deducted at 10 percent.
Kush Vatsaraj, Associate, TP Ostwal & Associates LLP said: "A concessional rate of 0.5% applies to foreign remittances out of an education loan from a financial organization ." He further added: "Remittances from which the remitter themself is susceptible to deduct taxes at source are exempt e.g. royalty, professional fees, rent remitted overseas to NRI landlord. Central and state governments, local authorities, and foreign diplomatic remitters are exempt."
GST won't apply to the TCS amount. and therefore the provision won't apply just in case the remitter is susceptible to deduct tax at source under the other provision of the tax act and the amount has been deducted and if the remitter is the Government or the other person notified by the govt. The remitter also can claim credit for the tax collected by the Bank while filing for his or her tax returns.
In case, a transfer is from already tax-paid income?
The TCS is often departed against the general liability of the taxpayer. If the parent has already paid tax on the cash in question on his or her income and is just gifting an equivalent to the kid, the parent can claim a refund from the TCS.
Who is going to be impacted?
Indian students studying abroad, Indian tourists going abroad and Indian investors investing in stocks, bonds, and property abroad are going to be impacted. It can raise the upfront cost of foreign education and travel, albeit the tax is often subsequently claimed back as a refund while filing the tax return.
Speaking about the impact of the tax to be levied on foreign fund transfers, Vatsaraj further said: "This reduces disposable cashflows, especially if one has low liabilities and has got to wait a year, or more, for a refund. It increases up-front costs of remittances to dependents overseas, e.g. parents sending money to children studying abroad. Tour & travel agents could suffer if people switch to self-bookings rather than buying packages to avoid TCS."