The Union Budget 2020-21 has introduced a new Tax Collected at Source (TCS) provision on foreign remittance. As per the earlier instructions, a 5 per cent (where PAN/ Aadhaar is available) tax collection at source has to be done for remittances over Rs 7 lakh, for all transactions under Liberalised Remittance Scheme (LRS). However, there have been amendments as per details below:
Below are examples for your reference:
Customer A |
Makes a remittance of Rs. 6 lakhs |
No tax will be deducted |
Makes a further remittance of Rs. 9 lakhs in the same financial year |
Total remittance Rs. 6 lakhs +Rs 9 Lakhs i.e 15 lakhs. Tax deduction on 8 lakhs (i.e Rs15 lakhs- 7 Lakhs) @ 5% = Rs. 40,000 |
|
Customer B |
Makes a remittance of INR 10,00,000 for pursuing Education through a loan obtained from any Financial Institute
|
0.5% tax will be collected on INR 10,00,000 - 7,00,000 = 3,00,000 i.eRs. 1500 |
The above tax provision will not apply in case the remitter is liable to deduct tax at source under any other provision of the act and the amount has been deducted. It will also not apply if the remitter is the government or any another person notified by the government