New rule from October 1: TCS will be sent more than Rs 7 lakh sent out of the country

A new rule related to TCS (Tax Collected at Source) is going to be implemented in the country from next month. The Income Tax Department has decided to extend the scope of TCS under section 206C (1G) and also apply it to the Liberalized Remittance Scheme (LRS). Remittance means money sent out of the country. Remittances can be either in the form of expenses (travel, educational expenses etc.) or in the form of investments.

TCS will apply if a remittance of 7 lakh rupees or more is sent by a customer in a financial year from October 1, 2020. The foundation of this new rule has been laid through the Finance Act 2020.

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LRS is the RBI scheme. The scheme allows capital account transactions up to $ 2.50 lakh within a financial year such as the purchase of property abroad, investment, loan extension to NRIs etc. Apart from this, it also allows for current account transactions up to $ 2.50 lakh in a financial year for private / employment visits, business trips, gifts, donations, medical treatment, care of close relatives, etc. Wire transfer is also included in this scheme for the purchase of goods through credit cards on international e-commerce websites.

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The new TCS provisions will apply to all foreign remittances approved under LRS. Under the new provision, the rate of TCS on remittances sent under LRS will be the same for Indian Naga Rickets…

note: Consecutive TCS is applicable only to the loan amount and not to the borrower’s margin

In case of remittance, the limit of Rs 7 lakh will be by adding all the LRS remittances during a financial year. If the remittances are done for the Overseas Tour Program Package, then 5% TCS will be applicable to all remittances, even if the amount is less than 7 lakhs. A new provision has also been made that 0.1 percent TCS will be applicable on the sale of goods worth more than Rs 50 lakh in a year.

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TCS will not be applicable if TDS is deducted

However, TCS will be charged only if the remittance is not from the income already covered by TDS. TCS will not be applicable if a person makes all the arrangements for a tour abroad by himself. If tax has already been paid in the form of TDS and yet TCS is imposed, then its refund can be claimed.

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Gift tax

Foreign remittance sent as a gift to NRI comes under the tax net in India and deducts TDS on it. However, if a relative NRI is given a gift of less than Rs 50000, then it will not be taxed. Where TDS is not applicable, TCS will be applicable on gifts to NRIs, if the gift is more than Rs 7 lakh.

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