NEW DELHI: The proposed increase in Tax Collected at Source (TCS) rates under the Liberalised Remittance Scheme, which was to come into effect from July 1, will now apply from October 1, 2023.
Till September 30, 2023, earlier rates (prior to amendment by the Finance Act 2023) shall continue to apply, an official release from the Ministry of Finance said. The decision to postpone the implementation date was considered after comments and suggestions were received from various quarters, the Finance ministry said.
In the Budget this year, certain changes were announced to the system of Tax Collection at Source (TCS) on payments under the Liberalised Remittance Scheme (LRS) and overseas tour programme packages. It was also announced earlier this year that credit card payments will be brought under the LRS.
“Through the Finance Act 2023, amendments were carried out in sub-section (1G) of Section 206C of the Act. These amendments, inter alia, increased the rate of TCS from 5 per cent to 20 per cent for remittance under LRS as well as for the purchase of overseas tour programme packages, and removed the threshold of Rs 7 lakh for triggering TCS on LRS”.
The changes, however, are not applicable when the remittance was for education or medical purpose. For the purchase of overseas tour programme packages, the TCS shall continue to apply at the rate of 5 per cent for the first Rs 7 lakh per individual per annum; the 20 per cent rate will only apply for expenditures above that limit.
Here is a table detailing the proposed changes in TCS for LRS:
The release said a new circular and Frequently Asked Questions (FAQs) will be issued to clarify various practical issues in implementing this provision.
In the first place, the Finance ministry had said the changes were necessitated as some instances have come to its notice where the LRS payments were “disproportionately high” when compared to the disclosed incomes of some.
Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to $2,50,000 per financial year (April-March) for any permissible current or capital account transaction or a combination of both.
The scheme was introduced on February 4, 2004, with a limit of $25,000. The LRS limit has been revised in stages consistent with prevailing macro and micro economic conditions. There are no restrictions on the frequency of remittances under LRS. (ANI)