Budget 2023 Impact – 1 : Foreign Remittance attracts higher TCS; how does it affect us?

Ramesh and his family are planning for an Australian tour in August 2023, costing Rs.20,00,000 for the entire family. The latest budget proposal requires him to arrange an additional Rs.2,40,000 (20% of the package cost) towards TCS.

What is TCS?

TCS (Tax Collected at Source) is a sibling of TDS (Tax Deduction at Source), wherein the service provider has to collect a prescribed percentage of taxes from the service recipients and remit them to the Government. For example, in the above case, the tour operator, Chariot Travels, will collect Rs.2,40,000 from Ramesh and remit it to the Government.

Is TCS an additional tax or cost?

No, TCS so collected will reflect in Form 26AS (a kind of passbook of your tax credits in the IT department). To continue the example further, Rs.2,40,000 will reflect as a credit against the PAN number of Ramesh.

While filing the Income Tax Return of Ramesh, he can adjust the said amount against his tax liability, if any or claim the amount as refund.

If Ramesh is an agriculturist and not filing any returns?

Here is the problem that arises. Even if Ramesh does not have any taxable income or exempt income, he must file an income tax return and claim TCS as a refund.

Is TCS only for tour packages?

No. If a Resident Indian (these rules do not apply to Non-Resident Indian – NRI  or OCI) transfer over Rs.7,00,000 per year to their children or for the purchase of property, or investment in shares or funds, then also TCS at 20% is applicable.

For example, if Mr Ramesh transfers Rs.1,00,00,000 (One Crore) to his son in the USA as a gift, he has to shell out Rs.18,60,000 (20% on Rs.93,00,000) in the form of TCS. As I said earlier, Ramesh can claim TCS as a tax refund while filing his tax return.

What about transfer towards Education or medical expenses?

There are no changes in this budget, and as per the prevailing rules, if the education loan is obtained from the bank, 0.5% of the amount sent out is deducted as TCS; if the amount is sent from savings, TCS of 5% is to be done. Similarly, if money is sent for medical treatment, 5% TCS is levied. However, in both Education and medical treatment, Rs.7,00,000 exemption limit is applicable.

To illustrate, if Rs.10,00,000 is sent for Education, TCS at 5% applies to Rs.3,00,000.

Budget  2023 Impact – 1

Resident Indians who need to transfer money abroad from 1st July 2023 will have to arrange additional money (Actual Cost+20%).

I will write more in the coming short note. If you have any doubts, please write to me.

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About B E Kumar Prasad

B E Kumar Prasad
He is a Practicing Chartered Accountant in Bengaluru, India. He has 25+ years of experience in income tax, business setup, and NRI matters. He is also an Insolvency Professional and Registered Valuer (F&SA).Prasad welcomes your comments and questions. Please email him at simplifiedlaws20@gmail.com

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Dr T
Dr T
1 month ago

I had read that the seven lakh limit was removed in the new budget. Which version is correct?

Nk prasad
Nk prasad
1 month ago

Beautifully explained for foreign tours and remittance on account of education or medical emergencies with example of Mr Ramesh.

Srivatsan Chakravarthy
Srivatsan Chakravarthy
1 month ago

Really simplified, well written Sir. 🙏🏼

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