If you’re planning to travel abroad for vacations or studies or considering foreign investments, there’s important news for you.
The Reserve Bank of India (RBI) has introduced new Tax Collection at Source (TCS) rates under the Liberalized Remittance Scheme (LRS), which will come into effect on October 1, 2023.
In simple terms, these new TCS rules will apply to foreign travel, foreign share investments, and mutual funds starting from October 1, 2023.
However, it’s important to note that these TCS rules will apply only when the expenses or investments exceed a certain limit.
Revised TCS Rates for Educational Expenses
Under the LRS, you won’t be charged any TCS for foreign remittances related to education expenses up to INR 7 lakhs.
If you take an educational loan from a recognized financial institution for foreign studies and send more than INR 7 lakhs in one financial year, you’ll need to pay a TCS of 0.5%.
If you send more than INR 7 lakhs for foreign studies without an educational loan, a TCS of 5% will be applicable.
Additionally, any expenses related to foreign studies will also incur tax at the same rate starting from October 1, 2023.
Updated TCS Rates for Medical Expenses
Starting next month, if you send more than INR 7 lakhs abroad for medical treatment within a financial year, you’ll be required to pay a 5% TCS on that amount.
Similarly, any expenses related to medical treatment abroad will also be taxed at the same rate, effective from October 1, 2023.
TCS Rates for Foreign Tour Packages and Investments
From October 1, 2023, if you purchase a foreign tour package exceeding INR 7 lakhs in one financial year, you’ll need to pay a 20% TCS.
If the cost of your tour package falls below INR 7 lakhs in one financial year, a 5% TCS will be applicable.
Moreover, if you make foreign investments exceeding INR 7 lakhs in one financial year, including foreign shares, mutual funds, and cryptocurrencies, you’ll be liable to pay a 20% TCS.
However, investments in Indian mutual funds dealing with foreign investments will not be subject to TCS.
Exemption for Credit Card Payments
Payments made through credit cards do not fall under the scope of LRS; hence, TCS won’t be applied to such transactions.
However, from October 1, 2023, a 20% TCS will be levied on transactions exceeding INR 7 lakhs made through debit cards and forex cards.