Aclaración sobre los cambios en las tasas de TCS en remesas al extranjero según la sección 206C(1G) | Circular n.º 10 de 2023, de fecha 30 de junio de 2023

As per Section 206C(1G) of Income Tax Act, inserted with effect from 01.04.2020, Authorised dealer are liable to collect TCS @ 5% on foreign remittance made under Liberalised Remittance Scheme (LRS) where remittance amount exceeds INR 7,50,000 during a year. However, seller of overseas tour program package shall be liable to collect TCS @ 5% without any threshold limit.

Finance Act, 2023 amended the provisions of Section 206(1G) to increase the rate of TCS from 5% to 20% for remittance under LRS as well as purchase of tour program packages and removed the threshold limit of INR 7,50,000.  However, such changes does not apply when remittance is made for education or medical purpose.

Department received various comments about practical difficulties being faced in implementation of revised provisions and therefore, CBIC issued the following clarification for practical issues being faced through Circular No. 10 of 2023 dated 30th June, 2023: 

1. Changes in Rate of TCS for Foreign Remittance

• Prior to Union Budget 2023, foreign remittances under LRS was liable to collection of TCS @ 5%. However, Union Budget, 2023, recommended the removal of the threshold hold limit of INR 7,00,000 in all cases and increased the rate of TCS from 5% to 20% except in the case of Medical and educational remittance.

• However, considering the recommendation received, Government vide press release dated 28th June, 2023 announced to restore the threshold limit of INR 7,00,000 for TCS on all categories of LRS Payments, through all modes of payment, regardless of purchase.

• Therefore, in line with press release issued, following are the revised rate of TCS of foreign remittance u/s 206C(1G):

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2. What is the Liberalised Remittance Scheme

The Liberalised Remittance Scheme is a policy formed by the Reserve Bank of India since 2004 to make it easier for people to send money abroad from India. Here are some points of LRS.

• El Esquema de Remesas Liberalizadas (LRS) se creó para facilitar las remesas al extranjero para las personas físicas. El LRS permite a los residentes indios, incluidos los menores de edad, transferir fondos libremente al extranjero para diversas transacciones hasta un límite determinado.
• Cada año financiero (abril - marzo), las personas pueden remitir libremente hasta 250 000 USD para transacciones permitidas en cuenta corriente o de capital, o una combinación de ambas.
• El esquema comenzó el 4 de febrero de 2004 con un límite de 25 000 USD, pero ha sido revisado con el tiempo según las condiciones económicas.
• Los menores también pueden utilizar el LRS, pero su tutor legal debe refrendar el formulario de declaración.
• El LRS no está disponible para empresas, sociedades colectivas, familias hindúes indivisas (HUF), fideicomisos, etc. Solo las personas físicas pueden utilizar esta facilidad.
• La facilidad de cambio de divisas solo puede utilizarse dentro del límite de 250 000 USD.

3. Effective date of change in Rate of TCS

• Amended provisions were initially proposed to be implemented from 1st July, 2023. 

• However, considering the recommendations received and to provide Banks and Card networks to put in place requisite lT based solutions, the government decided to extend the date of implementation of amended provisions of TCS from 1st July 2023 to 1st October, 2023.

• Therefore, rates applicable prior to the Union budget, shall continue to apply till 30th September, 2023 and revised provisions shall come into effect from 1st October, 2023.

4. Frequently Asked Questions

Whether payment through an overseas credit card would be counted in LRS?

Aclaración: Según el comunicado de prensa del 28 de junio de 2023, la clasificación del uso de tarjetas de crédito internacionales mientras se está en el extranjero como LRS ha sido pospuesta. Por lo tanto, no se aplicará ningún TCS a los gastos realizados mediante tarjeta de crédito internacional mientras se esté en el extranjero hasta nuevo aviso.

Whether the threshold Limit of Rs 7 lakh is applies separately for various purposes like education, health treatment and others or same is to be considered on cumulative basis?

Aclaración: La CBIC ha aclarado que el umbral de 700 000 rupias para el LRS es un umbral combinado, independientemente del propósito de la remesa. Esto también se aclara en la primera disposición de la Sección 206C(1G) de la Ley. Según dicha disposición, no se requiere TCS si el monto o la suma de los montos remitidos por un comprador es inferior a 700 000 INR en un año financiero. Dado que la antigua exención de 700 000 rupias ha sido restablecida por el comunicado de prensa, el umbral seguirá aplicándose después de la enmienda.Ejemplo:1. Remesa educativa: 700 000 INR 2. Remesa para fines médicos: 700 000 INR 3. Otros fines: 700 000 INR 4. En este caso, las remesas de hasta 700 000 rupias bajo el LRS durante un año financiero no estarán sujetas a TCS. Sin embargo, las remesas posteriores de 1,4 millones de rupias bajo el LRS estarán sujetas a TCS de acuerdo con las tasas aplicables para dichas remesas. 5. Además, las tasas de TCS para las remesas restantes de 1,4 millones de rupias bajo el LRS dependerán del momento de la remesa, ya que las tasas de TCS cambiarán a partir del 1 de octubre de 2023.

During FY 2023-24, TCS rates are changing for next six months, whether the threshold of Rs 7 lakh applies separately for each six months?

Aclaración: No. El umbral de 700 000 rupias se aplicará para todo el año financiero. Si este umbral ya se ha agotado, todas las remesas posteriores bajo el LRS, ya sea en el primer o en el segundo semestre, estarán sujetas a TCS a la tasa aplicable.

Whether the threshold of Rs 7 lakh applies separately for each remittance through different authorised dealers? lf not, how will authorised dealer know about the earlier remittances by that remitter through some other authorised dealer?

Clarification:  Department has clarified the threshold of Rs 7 lakh is qua remitter and not qua authorised dealer. Since the facility to provide real time update of remittance under LRS by remitter is still under development by the RBl, details of earlier remittances under LRS by the remitter during the financial year may be taken by the authorised dealer through an undertaking at the time of remittance. lf the authorised dealer correctly collects the TCS based on information given in this undertaking, he will not be treated as "assessee in default". However, for any false information in the undertaking, appropriate action may be taken against the remitter under the Act. Further, same methodology of taking undertaking from the buyer of overseas tour program package may be followed by the seller of such package.

Whether threshold of Rs 7 lakh for remittance under LRS  and threshold of INR 7 lakhs for purchase of overseas tour program package (where reduced rate of 5% applies) applies independently?

Clarification: Yes, these two thresholds apply independently. For LRS, the threshold of Rs 7 lakh applies to make TCS applicable. For purchase of overseas tour program package, the threshold of Rs 7 lakh applies to determine the applicable TCS rate as 5% or 20%.

If a person spends Rs 3 lakh for purchase of overseas tour program package from a foreign tour operator and remits money which is classified under LRS. There is no other remittance during the year. Whether TCS is applicable?

Clarification: ln case of purchase of overseas tour program package (even through classified under LRS), TCS provision for purchase of overseas tour program package shall apply and not TCS provisions related to LRS.Therefore, in given case, TCS shall be collected at 5% since the total amount spent on purchase of overseas tour program package during the financial year is less than Rs 7 lakh.

Whether purchase of international travel ticket or hotel accommodation on standalone basis is purchase of overseas tour program package?

Clarification: The term 'overseas tour program package' means any tour package which offers visit to a country or countries or territory or territories outside lndia and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto.Therefore, purchase of only international travel ticket or only hotel accommodation, by itself is not covered within the definition of 'overseas tour program package'. To qualify as 'overseas tour program package', the package should include at least two of the followings:- (i) international travel ticket, (ii) hotel accommodation (with or without food)/boarding/lodging, (iii) any other expenditure of similar nature or in relation thereto. .