5% TCS tax on money sent under RBI Liberalized Remittance Scheme

 

From next month when you send money abroad under the Liberalized Remittance Scheme of RBI, it will be charged TCS (Tax Collected at Source) at the rate of 5%. This tax will start levying from October 1, 2020. Its provision has been made in the Finance Act 2020.

 

In February this year, the government proposed an amendment to section 206C to impose 5% TCS on the sale of overseas remittances and overseas tour packages. The Finance Act, notified on March 27, sets a first October date for implementing these provisions. Many financial institutions have sent their customers to notice of the TCS provision coming into force from October 1, 2020. If you do not apply PAN or Aadhaar with the remittance, the rate of tax collected at source will be 10%. Credit can also be claimed for the TCS deducted by the bank in the tax return.

 

Many types of discounts have been given in the provision of TCS.

 

1. If the amount sent abroad is less than Rs 7 lakh and it is not for buying a tour package, then TCS will not be levied.

2. In case of a loan issued by a financial institution for studying abroad, only 0.5% of TCS will be charged on the amount above the limit of Rs 7 lakh.

3. TCS rate will be 10% if remittance is not accompanied by PAN or Aadhaar.

4. GST will not be levied on the amount deducted as TCS.

5. If any provision of the Income Tax Act is to deduct TDS on the amount to be remitted and TDS is deducted, then the provision of TCS will not apply to that amount.

6. If the government or a government-determined person sends the money abroad, it will not bear TCS.

7. The person remitting the money abroad can also claim the credit for the TCS deducted by the bank in his tax return.