If you plan on jet-setting from India for an international holiday anytime after October 1st, 2023 be prepared to conjure a little extra budget. That's right! The Indian government may be levying 20% Tax Collected at Source (TCS) on every transactions you make internationally.
In February 2023, during the Union Budget, Finance Minister Nirmala Sitharaman announced that the Tax Collected at Source (TCS) will now be 20% (from the earlier 5%) on foreign remittances. This meant that sending money abroad or making investments or purchases using debit cards, forex cards, bank transfers, or the stock exchange would become 20% more expensive.
But a new notification was announced on 28 June 2023 with regards to TCS.
Only time will tell when credit card/debit card transactions will come under the LRS scope and attract a high TCS. For now, it is a relief for international travellers.
Yes, the 20% TCS incurred (on foreign remittances or other LRS-led expenses) can be claimed back when you file your Income Tax Return if you have paid more TCS than your actual tax liability. To claim the TCS refund, complete the ITR form's relevant sections and provide supporting documentation. Consulting a tax professional or a qualified chartered accountant is advisable if you doubt claiming a TCS refund in your ITR.
While some argue that the 20% TCS is not an extra cost since you can eventually retrieve it, for some, the 20% charge may mean incurring a more significant upfront, blocking cash flow for immediate use.
A 20% additional TCS (Tax Collected at Source) on your planned travel budget can significantly impact your finances. As the saying goes, it's not just about earning money but also about saving wherever possible. That's why saving on your international expenses becomes crucial. By using a Fi-Federal Debit Card, you enjoy zero forex charges and enjoy a hassle-free spending experience during your international trip.
Tax Collection at Source (TCS) is an additional amount collected as tax by a seller of specified goods from the buyer at the time of sale over and above the sale amount and is remitted to the government account.
Form 26AS displays TCS as a tax credit that can be utilized to offset the tax liability while filing an Income Tax Return (ITR). Additionally, TCS can also be adjusted against advance taxes at the time of filing. In cases where the TCS amount cannot be offset against the taxes payable or any other form, it will be eligible for a refund following the completion of the ITR filing (specifically, ITR-07).
The only way to avoid these charges is if you have a bank account, credit card, or debit card issued in a foreign country. Alternatively, if you have friends or relatives who can make payments using their foreign accounts on your behalf, you can also bypass the charges. Alternatively, you can get a Fi-Federal co-branded Debit Card which will incur zero forex charges on your international holiday spends.
As per a revised notification issued by the government, as of now, you will not be charged a 20% TCS when you swipe your indian credit card abroad.