New Delhi :
Sending money from India to foreign countries under the Liberalized Remittance Scheme (LRS) is set to become more expensive.
Starting from July 1, 2023, a Tax Collected at Source (TCS) of 20% will be levied on remittances, with a reduced rate of 5% for health and education purposes.
This TCS will apply once the annual limit of 7 lakhs is exceeded.
Implications of the New Tax
From July 1 onward, a TCS of 20% will be deducted from any outward remittance for purposes other than education and health. This means that sending money abroad for investments in shares or properties will now incur an additional 20% tax on the total amount.
For example, if you are sending Rs 10,00,000 outside India, the bank will deduct Rs 12,00,000, with Rs 10,00,000 being the actual remittance and Rs 2,00,000 being deducted as TCS.
However, you can claim a tax credit for this amount when filing your income tax return.
Reason behind the Decision
According to media reports, the primary objective of implementing this policy is to monitor and regulate high-value international credit card transactions.
This move aims to bolster forex reserves, combat money laundering, increase tax revenue, and streamline the income tax return filing process.
Failure to file an income tax return when TCS deducted from such remittances amounts to Rs 50,000 or more may result in subsequent income being subject to TCS or Tax Deducted at Source (TDS) at a rate of 50% or higher.
HDFC Bank Implements the New Rule
HDFC Bank, India’s largest private sector bank, has already implemented the revised regulations.
The bank has informed its customers that tax collection on all foreign remittances under LRS has been increased effective July 1, 2023.
Customers have been notified of these changes through the bank’s website, indicating amendments in foreign currency transactions by resident individuals under the Finance Act 2023 LRS.
