Implementation of Incerased LRS TCS Rates from October 1, 2023

The Ministry of Finance, Government of India, has recently announced significant changes to the Liberalised Remittance Scheme (LRS) and Tax Collected at Source (TCS), which shall be implemented from 1st October, 2023 as against earlier deadline of 1st July, 2023. These changes aim to provide clarity and flexibility in the taxation system related to foreign remittance and overseas tour programs.

No Change in LRS TCS Rates for Overseas Travel upto Rs 7 Lakh

Under the revised regulations, there will be no change in the Tax Collected at Source (TCS) rates for all purposes under the Liberalised Remittance Scheme (LRS). Additionally, the TCS rates for overseas travel tour packages will remain the same, irrespective of the mode of payment, as long as the amount does not exceed Rs 7 lakh per individual per annum. The 20% rate will only apply for expenditure above this limit.

Implementation of Incerased LRS TCS Rates from October 1, 2023

Extended Implementation Time for Revised TCS Rates and Credit Card Payments

To ensure a smooth transition and give stakeholders sufficient time to adapt, the government has decided to extend the implementation time for the revised TCS rates and the inclusion of credit card payments in the Liberalised Remittance Scheme (LRS). These changes will now come into effect from 1st October 2023, instead of the previously announced date of 1st July 2023.

Restored Threshold for TCS on LRS Payments

One of the notable changes is the restoration of the threshold for triggering TCS on all categories of LRS payments. The threshold of Rs 7 lakh per financial year per individual, regardless of the purpose, will now determine whether TCS is applicable. Transactions below this threshold will not be subject to TCS, providing relief for individuals with lower remittances.

TCS Rates for LRS Payments upto September 30, 2023

For remittances under the Liberalised Remittance Scheme (LRS), the TCS rates applicable up to September 30, 2023 are as follows:

i) For education financed by an education loan, no TCS will be applicable for the first Rs 7 lakh. Beyond this threshold, a TCS rate of 0.5% will apply.

ii) In the case of remittances for medical treatment or education (other than financed by loan), no TCS will be applicable for the first Rs 7 lakh. Beyond this threshold, a TCS rate of 5% will apply.

iii) For overseas tour program package, the TCS shall continue to apply at the rate of 5% (without threshold).

iv) For other purposes, no TCS will be applicable for the first Rs 7 lakh. Beyond this threshold, a TCS rate of 5% will apply.

Revised TCS Rates Effective from 1st October 2023

The increased TCS rates, which were initially set to come into effect from 1st July 2023, will now be implemented from 1st October 2023. This delay provides stakeholders with additional time to prepare for the changes. Until 30th September 2023, the earlier TCS rates (prior to the amendment by the Finance Act 2023) will continue to apply.

Summary of Revised TCS Rates for LRS Payments

To summarize the revised TCS rates for LRS payments:

A. LRS for education financed by a loan:

i) No TCS for the first Rs 7 lakh

ii) 0.5% TCS for amounts exceeding Rs 7 lakh

B. LRS for medical treatment/education (other than financed by a loan):

i) No TCS for the first Rs 7 lakh

ii) 5% TCS for amounts exceeding Rs 7 lakh

C. LRS for Overseas Travel:

i) 5% TCS for the first Rs 7 lakh

ii) 20% TCS for amounts exceeding Rs 7 lakh

C. LRS for other purposes:

i) No TCS for the first Rs 7 lakh

ii) 20% TCS for amounts exceeding Rs 7 lakh

Updated Rules and Legislative Amendments

The necessary changes or legislative amendments in FEMA Rules, etc. will be carried out separately to reflect these revised regulations. Additionally, circulars and Frequently Asked Questions (FAQs) will be released by the Government to provide further clarification on the practical implementation of these provisions.

Conclusion

These changes in the Liberalised Remittance Scheme (LRS) and Tax Collected at Source (TCS) aim to streamline the taxation process for foreign remittance and overseas travel tour packages. The extended implementation time and the restoration of the threshold for TCS will provide individuals and businesses with greater clarity and flexibility in their financial transactions. It is important for stakeholders to familiarize themselves with these revised regulations and ensure compliance with the updated TCS rates and requirements.

Related Posts:

CBDT’s FAQs/Clarifications on TCS for LRS & Overseas Tours

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2 Comments

  1. Prerna Singh
  2. KG Mathew

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