If you are remitting over ₹6 lakh overseas, then it is likely to come under the purview of income tax as Central Board of Direct Taxes (CBDT) has reportedly commenced a thorough investigation into high value foreign remittances above ₹6 lakh, Business Standard reported.
The apex body of direct taxes is reportedly cracking down on foreign remittances to spot the discrepancies between what the taxpayers reveal and the actual data shows, said the report.
This brings into focus the rate of higher TCS (tax collected at source) imposed by finance ministry on high value remittances effective last year.
Higher TCS on remitting over ₹7 lakh
It is noteworthy that the finance ministry rolled out changes with respect to tax collected at source (TCS) last year starting Oct 1, 2023 to impose 20 percent tax rate on remittances above ₹7 lakh.
The higher tax rate was to be implemented from July 1 onwards, but it was later postponed for three months until Oct 1.
The TCS rate was 5 percent earlier on these transactions. In fact, it had initially entailed spending via credit cards. However, after the backlash, government excluded the payments via credit cards from LRS limits, thus sparing the higher rate of TCS.
Exemption on higher TCS on remitting over ₹7 lakh
The finance ministry had also exempted certain categories of expenses from higher tax rate such as medical expenses and education.
What is LRS?
Under the RBI’s Liberalised Remittance Scheme (LRS), all resident individuals are allowed to freely remit up to $2,50,000 in one financial year for any permissible current or capital account transaction or a combination of both.
What is a TCS?
It is an additional tax imposed by the seller over and above the selling price of a specific product or service. This 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.