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Starting October 1, 2023, revised Tax Collected at Source (TCS) rates will be enforced in India, impacting various financial transactions. TCS will apply when expenditures exceed a specific threshold during the fiscal year, covering a wide range of activities, including foreign trips, international remittances, and investments in foreign assets, mutual funds, crypto currencies, and educational expenses abroad. Under the Reserve Bank of India's Liberalized Remittance Scheme (LRS), individuals can send up to US$250,000 annually. However, beginning October 1, 2023, a 20 percent TCS will be levied on international remittances exceeding INR 700,000 (US$8,430.18) within a fiscal year, excluding medical and educational expenses. These changes require attention from businesses and individuals alike.

Commencing on October 1, 2023, a notable alteration is on the horizon for Indian investors engaged in foreign remittances. The introduction of a 20% Tax Collected at Source (TCS) on foreign remittances exceeding Rs 7 lakh in a financial year carries significant implications for those dealing with international stocks, crypto currencies, and overseas real estate investments. In this article, we will delve into the specifics of this new TCS rule and its impact on your financial endeavours.

The new 20% Tax Collected at Source (TCS) on foreign remittances exceeding Rs 7 lakh in a financial year, effective from October 1, 2023, marks a significant shift in Indian taxation. Currently, remittances up to Rs 7 lakh are exempt from TCS, but under the Liberalised Remittance Scheme (LRS), investors sending over this amount for foreign securities face a 5% TCS.

The Budget 2023 raised the TCS rate to 20% for foreign remittances over Rs 7 lakh via the LRS, applicable to various overseas investments. This change prompts individuals to reconsider their financial strategies, especially for international stocks, real estate, and overseas assets.

Forex cards will now be subject to a 20% TCS if loaded with over Rs 7 lakh in a financial year, replacing the previous 5% rate. Importantly, international credit card transactions remain TCS-exempt, creating a choice between forex and credit cards for overseas travel.

Understanding that TCS is not an additional income tax, the deducted amount can be adjusted against your tax liability during your income tax return (ITR) filing. If no tax liability exists, you can claim a refund. However, be prepared for potential cash flow challenges, as the amount may be blocked until the refund is processed. This change highlights the need for individuals involved in international investments to stay informed about the implications of TCS and adjust their financial plans to effectively manage potential cash flow issues.

This Article is a Knowledge-sharing initiative and is based on the Relevant Provisions as applicable and as per the information existing at the time of the preparation. In no event, VFSL or the Author or any other persons be liable for any direct and indirect result from this Article or any inadvertent omission of the provisions, update, etc. if any. Decisions must be taken only after thorough consultation with our Advisors .