The Indian Budget 2023 presented several noteworthy policies, initiatives and regulations. While the changes in income tax slabs were the highlight of the Union Budget, another notable policy was the ‘20% TCS on foreign travel’ under the Liberalised Remittance Scheme. The possible reason behind this move might be to bring a limit to International Credit Card spending and encourage Indians to spend more within India itself.
What is the 20% TCS on Foreign Remittance Transactions?
Let’s understand this concept in layman’s terms. Starting with Foreign Remittance Transactions. This is the money that you have sent abroad. It is not only applicable to money sent to someone as remittance but also includes international tour packages, shopping, abroad investments, purchasing assets, etc. The Liberalised Remittance Scheme (LRS) lets you do these transactions with ease.
Such foreign transfers are subjected to Tax Collected at Source, i.e. TCS. TCS is the tax that is collected by the seller of particular goods and services from the buyer.
Previously, under the LRS, for foreign equity investments, the TCS levied for remittances exceeding Rs. 7 lakhs a year was 5% of the exceeding amount. Owing to revisions under the new budget, there have been some changes in the TCS structure.
Updates on Increase in TCS
According to the India Budget 2023, there has been an increased rate of TCS. The TCS on foreign remittance has been increased from the previously applicable rate of 5% TCS with a threshold limit of Rs. 7 lakh to 20% above the same limit. One has to pay 20% TCS on foreign travel, shopping, investments, etc. There will be no increase in remittance on transactions concerning education and medical treatment, i.e. it remains to be 5% only.
Initially, the update in the TCS structure was to be applicable from the 1st July 2023 onwards. However, according to the 20% TCS deadline extension, the new TCS rates will be in effect from 1st October 2023.
What Is TCS Applicable On? How Much?
| Type of Remittance | Current Rate of TCS | New Rate wef from 1st Oct 2023 |
| For Education | 5% on excess amount of Rs. 7 lakh. | Nil up to Rs. 7 lakh. 5% on excess amount above Rs. 7 lakh |
| For Education* (Loan from financial institution) | 0.5% on excess amount of Rs. 7 lakh | Nil up to Rs. 7 lakh. 5% on excess amount above Rs. 7 lakh |
| For Medical Treatment | 5% on excess amount of Rs. 7 lakh. | Nil up to Rs. 7 lakh. 5% on excess amount above Rs. 7 lakh |
| Overseas Tour Packages | 5% with no threshold limit | 5% till Rs 7 Lakh, 20% TCS on foreign travel thereafter. |
| Investments | 5% on excess amount of Rs. 7 lakh. | 5% till Rs 7 Lakh. 20% TCS on investments thereafter |
Worried About 20% TCS on Foreign Travel?
You need not worry about this. According to the Finance Ministry, the threshold limit of Rs. 7 lakhs will be restored for LRS payments. So, the 20% TCS on foreign travel will be applicable above Rs. 7 lakhs. However, it is basic understanding that the expenses will exceed.
According to the RBI, you can purchase currency before 60 days of travel. One simple way to avoid 20% TCS on foreign travel is by simply making your holiday bookings before 1st October 2023.
To save the extra 15% on foreign remittance, it is advisable that you start planning your holidays with a reputed travel agency like Akbar Travels before October, 2023. With us, you can not only book your international holiday packages but also get visa services for all countries, make worldwide hotel bookings online and cheap flight bookings online.
Is TCS on Foreign Remittance Refundable?
Even if you make foreign payments after 1st October 2023, you can still claim a refund or credit when filing your income tax return or adjusted in your advance tax payments. You can easily claim it back with a TCS Certificate and the acknowledgement receipts.
To know more about the TCS structure, visit the Ministry of Finance website.
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