scorecardresearchStarting Oct 1, reloading forex cards for over ₹7 lakh to attract 20%

Starting Oct 1, reloading forex cards for over 7 lakh to attract 20% TCS. Details here

Updated: 26 Sep 2023, 10:09 AM IST
TL;DR.

If you reload your forex card for more than 7 lakh starting Oct 1, it will attract a TCS of 20 percent. The higher tax rate, however, won’t apply to payments made via credit cards

Those remitting money for education and medical purposes will continue to pay a lower rate

Those remitting money for education and medical purposes will continue to pay a lower rate

Travelling to an overseas destination can cost you dearly from next month as the proposed increase in the tax collection at source (TCS) will come into effect.

If you reload your forex card for an amount more than 7 lakh starting Oct 1, it will attract a TCS of 20 percent.

The higher tax rate, meanwhile, won’t apply to payments made via credit cards, thanks to the timely withdrawal of credit card payments for computing higher tax rates .

It is, however, vital to point out that those remitting money for education and medical purposes will continue to pay a lower rate of TCS for remittances in excess of 7 lakh under the liberalised remittance scheme.

Earlier the proposed tax was set to be implemented w.e.f. July 1, the deadline was later deferred to Sept 30. Here we give a lowdown on the latest rules:

What is a TCS?

It is an additional tax levied by the seller over and above the selling price of a specific product or service. This amount is collected at the time of sale and then deposited to the tax authorities. However, the TCS paid can be adjusted against the individual's tax liability at the time of filing an income tax return. So, if the total tax liability turns out to be lower than TCS, the taxpayer will stand to get a tax refund.

What is LRS?

It stands for liberalised remittance scheme introduced by the RBI in 1999 as part of Foreign Exchange Management Act. Under this, any resident citizen is free to remit up to $2,50,000 in a year without having to seek any permission.

What is the latest rule on higher tax rate?

Under the liberalised remittance scheme, any Indian citizen is permitted to remit up to $2,50,000 in a year. When the new rules kick in, a higher tax rate of 20 percent will be levied on remittance more than 7 lakh in a year.

Are there any exceptions to this rule?

Yes, when remittance is made for medical and educational purposes over a threshold of 7 lakh in a year, it will attract a TCS of 20 percent.

What will be the rates applicable for remittances made for educational purposes?

When remittance is sent for an amount below 7 lakh, there will be no TCS. Above 7 lakh, TCS on remittances obtained not through loan will be 5 percent whereas the money raised through loan will attract only 0.5 percent loan.

What rates will be applicable for remittances made for medical expenses?

The medical expenses will attract a TCS of 5 percent when LRS threshold crosses 7 lakh in a year.

Will the credit card expenses also be covered under this?

No, earlier the government had proposed to extend the higher tax rate to credit cards too, but withdrew the proposal later amid a lot of criticism by a section of stakeholders.

 

 

Article
On tax saving FD, you can save tax up to 1.5 lakh in a year.
First Published: 26 Sep 2023, 10:09 AM IST