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Understanding 20% TCS on Foreign Remittance | October 2023 Update

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"Understanding 20% TCS on Foreign Remittance | October 2023 Update"

Sayan Das

Things you need to know before investing in US Stocks, simplified to a T

<p>The Union Budget proposed by Finance Minister Nirmala Sitharaman in February 2023 announced some significant modifications to personal finance. One of them is <a target="_blank" rel="noopener noreferrer" href="https://fi.money/blog/posts/what-are-the-new-income-tax-slabs-as-per-budget-2023">the introduction to the New Tax Regime </a>. Another significant development was the TCS (Tax Collected at Source) for foreign transactions.</p><p>If you plan to <a target="_blank" rel="noopener noreferrer" href="https://fi.money/blog/posts/top-5-us-stocks-to-watch-in-2023-expert-predictions-and-analysis">invest in US stocks in 2023 </a>, or maybe take a foreign trip and make other foreign transactions, this read is a must for you!</p><h2>What is TCS in Foreign Remittance Transactions?</h2><p>When people move money abroad for remittances, travel expenditures, asset purchases, shopping, and investments, they are subject to a tax known as TCS, or Tax Collected at Source. Such transfers are made possible under the LRS (Liberalised Remittance Scheme). The TCS rate for the majority of remittances (apart from those for medical and educational expenses) increased from 5% to 20% in the 2023 Union Budget. This modification aims to increase tax income and promote domestic spending. While education and medical remittances remain at 5% for sums over ₹10 lakhs, the new 20% TCS rate will be in force as of 1 April 2025. When submitting income tax returns, taxpayers can claim TCS deductions as refunds or credits, which can be used to reduce their tax obligations. Effectively handling tax liabilities in cross-border transactions requires a thorough understanding of TCS.</p><h3>2023 Union Budget update in TCS</h3><p>The TCS has now increased to 20% from 5% for all remittances except those concerning education or medical treatment. Remittance is any money you send abroad. You’ll still be taxed at 5% for amounts exceeding ₹10 lakhs* for education and medical treatment in a foreign land.</p><p>*Comes into effect from 1 April 2025 onwards.</p><h2>TCS on Foreign Remittances Increased to 20% — Why?</h2><p>There can be many reasons for this. While most of these pertain to increasing the tax revenue, the Indian government encourages its citizens to spend their money travelling and spending within India. But if you're planning an international travel soon, here's how <a target="_blank" rel="noopener noreferrer" href="https://fi.money/blog/posts/how-will-20-tcs-affect-your-next-international-travel">20% TCS can have an impact on it </a>.</p><p><a target="_blank" rel="noopener noreferrer" href="https://economictimes.indiatimes.com/small-biz/trade/exports/insights/from-rupee-depreciation-and-gst-to-indias-outward-remittances-a-look-at-top-headlines-dominating-the-indian-import-sector/articleshow/95885304.cms?from=mdr">Outward foreign remittances were at an all-time high in 2022 </a>, especially at a time when the Rupee was at its weakest. It might also be to ensure that those spending money abroad file returns in their own country — since it’s a direct cut to the bank at the time of remittance.</p><h2>How will 20% TCS Affect Us From 1st October 2023?</h2><ul role="list"><li>After 1st October, 2023, 20% TCS will be applied on all outward remittance without a slab for US Stocks. Let’s break this down with the help of an example. Let’s assume you invest ₹1 lakh in US Stocks. The TCS will be 20% of ₹1,00,000 which equals to ₹20,000.</li><li>Let’s say you remit ₹20 lakhs for education or medical treatment, a TCS of 5% will be applicable for an aggregate amount that’s in excess of ₹10 lakhs. This means you will have to pay 5% on ₹13 Lakhs (₹20 Lakhs - ₹10 lakhs), which is ₹65,000.</li><li>If you haven't started your <a target="_blank" rel="noopener noreferrer" href="https://fi.money/blog/posts/how-you-can-invest-in-us-stocks-from-india">US Stocks journey </a>yet, here's how you can do it like a pro.</li></ul><h2>How to Get Tax Benefits From the New TCS?</h2><p>The good news is that you can claim this deducted money while filing your taxes. You can get your money back in one of two ways:</p><ul role="list"><li>Claim it as an income tax refund.</li><li>Claim it as a credit while filing your ITR or computing your advance taxes.</li></ul><p>For instance, you decide to remit ₹5 Lakhs for US stock market investments. TCS on the remitted amount would be ₹1,00,000. Say, your total tax liability for the financial year or advance tax dues stand at ₹3,00,000. You can use the TCS amount to lower your outstanding tax liabilities. Thus, your new tax liability would now be ₹2,00,000.</p><h2>Knock Knock! US Stocks at Your Phone-step</h2><p>Your search for the best <a target="_blank" rel="noopener noreferrer" href="https://fi.money/features/us-stock-market-investing">US Stocks platform </a>ends here! Fi enables you to <a target="_blank" rel="noopener noreferrer" href="https://fi.money/features/us-stock-market-investing">invest in top US companies </a>— at industry-best forex rates. So you can own shares in Apple, Tesla, Microsoft, and so on! With an intuitive user interface, Fi simplifies the world of <a target="_blank" rel="noopener noreferrer" href="https://fi.money/features/us-stock-market-investing">US Stocks </a>. Besides in-app explainers, novice investors can use Curated Collections (like All-Time Favourites) to make decisions. Seasoned investors can dive deeper, apply many filters (like Stock Price) &amp; pick from a wide range of international options.</p><p>You can start your US Stocks journey from just $10 (which is about ₹830 or so, as of June '23).</p><h2>Conclusion</h2><p>The 2023 Union Budget introduced significant changes to personal finance, including the implementation of a 20% TCS (Tax Collected at Source) on foreign remittances, excluding education and medical expenses. This increase in TCS aims to boost tax revenue and encourage domestic spending. Starting from 1st October 2023, the new 20% TCS rate will apply to all outward remittances.</p><p>However, there are exemptions for certain scenarios, and understanding TCS is crucial for effectively managing tax liabilities in cross-border transactions. Also, investing in US stocks through platforms like Fi provides opportunities to own shares in top US companies with user-friendly interfaces and no brokerage fees, making it accessible to a wide range of investors.</p><h2>Frequently Asked Questions</h2><h3>1. What is the TCS limit for foreign remittances?</h3><p>The TCS limit for foreign remittances in India is currently set at 5% for all foreign remittances exceeding ₹10 lakhs in a financial year (applicable from 1st April 2025). But from 1st October 2023, the new TCS rate will be 20%.</p><h3>2. What is the new TCS rule in 2023?</h3><p>The TCS has now gone up to 20% from 5% for all remittances except those concerning education or medical treatment. Remittance is any money you send abroad. You’ll still be taxed at 5% for amounts exceeding ₹10 lakhs for education and medical treatment in a foreign land.</p><h3>3. Can I claim a TCS refund in ITR?</h3><p>Yes, you can claim a TCS refund in your Income Tax Return if you have paid more TCS than your actual tax liability. To claim the TCS refund, you must fill out the ITR form's relevant sections and provide supporting documentation. Consulting a tax professional or a qualified chartered accountant is advisable if you have doubts or confusion about claiming a TCS refund in your ITR.</p>

Understanding 20% TCS on Foreign Remittance | Fi Money

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