Tax collection at source (TCS) on foreign remittances will only be applicable on the amount in excess of Rs 7 lakh in a financial year and not on the total amount.
The TCS on foreign remittances kicks in from October 1. Under the provisions, any amount sent abroad to purchase foreign tour packages, and other foreign remittance made above Rs 7 lakh will attract TCS.
"Overseas tour program package" is proposed to be defined to mean any tour package which offers visit to a country or countries or territory or territories outside India and includes expenses for travel or hotel stay or boarding or lodging or any other expense of similar nature or in relation thereto.
While the tax on foreign tour packages will be 5 per cent for any amount, for other foreign remittances the tax will kick in only for the amount spent above Rs 7 lakh.
All remittance out of India under the LRS of RBI, shall be liable to collect TCS at 5 per cent but in non-PAN/Aadhaar cases the rate shall be 10 per cent.
In cases where the amount is remitted for the purpose of pursuing education through a loan obtained from any financial institution, rate of TCS shall be 0.5 per cent on amount exceeding Rs 7 lakh.
The provision will not apply in case the remitter is liable to deduct tax at source under any other provision of the act and the amount has been deducted. It will also not apply if the remitter is the government or any another person notified by the government.
Under the Reserve Bank of India's liberalized remittances scheme, individuals can send a maximum of $250,000 overseas very year. The provision to collect tax on remittances was introduced in the Finance Act of 2020 subject to riders and notified on 27 March to take effect from October 1.