The Union Budget 2020 proposes to levy a TCS (tax collection at source) on remittances made outside India and on sale of overseas tour packages. The authorised dealer receiving amounts for remittances out of India and a seller of overseas tour package collecting money from a buyer, have to collect tax at 5%. In case of remittance from an education loan, the TCS is 0.5% on the amount in excess of Rs 7 lakh.
The TCS will be applicable for transactions on and after 1 October 2020. The TCS will be 3.75% until 31 March 2021 on overseas tour packages and foreign remittances in excess of Rs 7 lakh. And, the TCS will be 0.375% in case of foreign remittance out of education loan.
An authorised dealer receiving amounts from resident individuals has to collect TCS where the amount or the aggregate of the amount is above Rs 7 lakh. The TCS covers all remittances made under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI). The remittances may be towards expenditure or investments outside India.
A seller of an overseas tour programme package should also collect tax from the buyer of the package. The tour package can be for a visit to a country or countries or territory or territories outside India. The sale of the tour package will include expenses for travel or accommodation or any other expense of similar nature or concerning such tour.
In both the situations mentioned above, if the remitter of money or buyer of overseas tour package does not furnish PAN or Aadhaar, a higher rate of TCS at 10% will be collected.
An authorised dealer is a person authorised by the RBI under the foreign exchange regulations.
The move will burden the individual remitters of money outside India, as well as increase the cost of overseas tour packages. However, a credit can be claimed by the remitter of the money or the buyer of the package while filing their income tax return.
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I am a Chartered Accountant by profession. I specialise in personal taxes and corporate income tax matters. I am an avid reader and track developments in financial markets, economy and other market developments.