All you need to know about the New TCS Guidelines on Foreign Exchange

The changes in Tax Collected at Source (TCS) provision under section 206C (1G) of the Income Tax Act on Foreign Remittances has been implemented. TCS is not an additional tax liability, but an advance tax. TCS collected by the seller is reflected in the individual’s Form 26 AS and it can be offset against their total tax liability for the financial year. In case there is no tax liability of the individual, refund can be claimed for the same.

When is this applicable from?

The changes in  Tax Collected at Source (TCS) provision under section 206C (1G) of the Income Tax Act on Foreign Remittances goes into effect from 1^st October 2023 and new TCS rates will be applicable. However, the threshold of Rs. 7 lakhs will be calculated based on the transactions conducted throughout the complete financial year i.e. FY 23-24

Understanding TCS on Foreign Remittances under LRS

LRS transactions are those transactions which are a part of Liberalized Remittance scheme – a scheme launched by RBI allowing the Resident Individuals to do foreign remittance for permitted current/capital account transactions/combination of both, without any cumbersome approval processes. The current LRS limit is 2,50,000 USD or equivalent per financial year.

TCS applies to all overseas remittances which fall under the Liberalized Remittance Scheme (LRS) of RBI. Overseas remittance can be done for a variety of purposes such as university fees, medical expenses, accommodation expenses, etc. It is important to note that TCS will be collected for all remittances which are covered under the of Liberalized Remittance scheme, only the TCS rates will differ for each remittance based on the purpose of remittance.

Will GST be charged on TCS?

GST won’t be charged on the tax collected at source (TCS).

Can I claim TCS back?

Please note that TCS is not an additional charge and can be adjusted against your total income tax liability and may be claimed while filing your personal income tax return.

TCS % and Threshold limits applicable from 1^st Oct 2023

Threshold limit is the amount up to which TCS is not required to be collected. A brief description about TCS rates and threshold limits on foreign remittances under LRS, applicable from 1^st October 2023 are as follows-

1. TCS rates for Educational Expenses- TCS % for foreign remittance done under LRS for the purposes of education is 5% in case of own funds, but when loan is taken from specified institutions for education, then the TCS% is 0.5%. Also, there is a threshold limit of 7 lakhs per financial year. This means that no TCS will be collected on foreign remittances educational expenses which are below Rs 7 lakhs.

• TCS rates for Medical Expenses- TCS % for foreign remittance done under LRS for purpose of medical expenses is 5%, with a threshold limit of 7 lakhs per financial year. This means that TCS of 5% will be collected if the overseas medical expenses cross the amount of Rs 7 lakh during financial year

• TCS rates for purposes other than educational and medical- TCS % for Foreign remittance under LRS for purposes other than education and medical has changed from 5% to 20%, with the same threshold limit of 7 Lakhs per financial year. This includes all overseas outward remittances such as bank account transfer, foreign exchange, loading forex card etc. So now if you buy Forex card or currency for your Family Foreign Trips TCS will not apply up to 7 lakhs and above 7 lakhs, TCS of 20% will be collected.

• TCS rates for overseas tour package- TCS % for Foreign remittance under LRS for overseas tour package payments has also changed from 5% to 20% beyond the threshold limit of 7 Lakhs per financial year. This means that incase you are booking an overseas tour package after 30^th September 2023, 5% TCS will be collected up to Rs 7 Lakhs but beyond this limit a TCS of 20 per cent will be collected.

Will TCS be applicable if foreign exchange facility is availed in Cash/Forex Cards?

Yes, TCS at 20% will be applied on LRS transactions exceeding ₹7 lakhs if foreign exchange facility is availed through FCY (Foreign Currency) Cash withdrawal at branches/loading Forex cards. It is applicable on cash, cards, foreign demand draft and wire transfers.

Is TCS applicable to NRI’s too?

Non-residents and Foreign Nationals (non-resident) will not be considered and thus, TCS will not be applicable.

How can WSFx Global Pay help you?

With over 30+ years of experience in the Forex Industry, WSFx Global Pay is a trusted companion which can assist you throughout your outward remittance and TCS Journey by helping you complete your remittance in a hassle free manner. It is transforming the Forex Industry through its innovative digital solutions and covers all your forex and remittance needs, that too at better and affordable rates as compared to other authorized dealers!

Whether you are student remitting your international university fees or a traveler looking for currency exchange, WSFx Global Pay covers all your forex needs. WSFx Global Pay is the best platform for all forex products and services- Forex card, Remittance and currency exchange.

Our friendly customer support team is available to assist you throughout your transaction journey and solve all your remittance and TCS queries. You can always write to us at customersupport@wsfx.in for any further doubts or clarifications with respect to TCS, we at WSFx Global Pay will be happy to assist you.