FAQs

What is Liberalised Remittance Scheme (LRS)?

Under the Liberalised Remittance Scheme (LRS), all resident individuals (as defined under FEMA 1999), including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.

It is mandatory for the resident individual to provide his/her Permanent Account Number (PAN) for all transactions under LRS.

What is the effective date of applicability of the TCS on foreign remittances under LRS ?

TCS on foreign remittance under LRS is effective on any remittance transaction under LRS on or after 1^st October, 2020.

What are the different purposes on which the tax collection is applicable?

The tax will be applicable on all remittance(s) that fall under the LRS of RBI.

What all transactions will be impacted by this TCS provision?

All remittances more than Rs. 7 lakhs in a financial year done under the LRS will be liable for a 20% TCS except if the remittance is for education paid through a loan obtained from any financial institution, where the TCS rate would be 0.5%.

The exemption from TCS on remittance overseas under LRS for amounts less than Rs. 7 lakh in a financial year will not be applicable, if the amount is being remitted for the purchase of overseas tour program package. Therefore, there is no monetary threshold prescribed for remittance for the purchase of overseas tour program package and bank will collect TCS on the entire amount irrespective of its value.

What is the new tax implication on remittances for pursuing overseas education?

TCS at 0.5% shall be applicable on the amount exceeding Rs. 7,00,000 in a financial year under LRS, if the amount remitted is obtained out of a loan from a Financial Institution for pursuing education.

For this purpose, ‘financial institution’ means a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act); or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf.

E.g. if the total amount remitted under LRS in a financial year is Rs. 8,00,000 for pursuing overseas education, TCS at 0.5% will be applicable on Rs. 1,00,000 (Rs. 8,00,000 – Rs. 7,00,000).

What is the tax implication if the amount remitted for pursuing education abroad is owned funds or out of loans from Non-specified institutions/private parties?

TCS at 5% shall be applicable on remittances exceeding Rs. 7 lakhs in a financial year.

What is the tax implication of remittances for the purchase of overseas tour program package under LRS?

TCS at 5% will be applicable on the total amount remitted and Bank will collect TCS on the entire amount irrespective of its value.

For instance, if the amount remitted is Rs. 2,00,000, TCS at 5% will be applicable on entire Rs. 2,00,000.

Which transactions are included in threshold limit of Rs. 7 lakhs, above which TCS shall be applicable?

All forex transactions under LRS will be included in threshold limit of Rs. 7 lakhs. However, there is no monetary threshold prescribed for remittance for the purchase of overseas tour program package and bank will collect TCS on the entire amount irrespective of its value.

How threshold limit of Rs. 7 lakhs would be computed for FY 2020-21?

TCS on all forex transactions under LRS shall be applicable from 1^st October, 2020. However, for tracking the threshold limit of Rs. 7 lakhs, all forex transactions under LRS made from 1^st April, 2020 would be considered.

Will TCS be applicable if foreign exchange facility is availed in Cash / Forex cards?

Yes, TCS will be applied on LRS transactions exceeding Rs. 7 lakhs if foreign exchange facility is availed through FCY Cash withdrawal at Branches / loading Forex cards.

What is the applicable TCS if PAN /AADHAR is not updated on Bank's records?

It is mandatory for the resident individual to provide his/her Permanent Account Number (PAN) for all transactions under LRS.

Will GST be applied on the TCS amount?

No GST will be applicable on the tax collected as TCS. However, GST will be applicable on the currency conversion, remittance service charge and other charges.

What are the scenarios under which the Bank will not collect TCS?

The Bank will not collect TCS in case:

The remitter is liable to deduct tax at source under any other provision of the act and the amount has been deducted and proof of the same is submitted to the bank
The remitter is Government or any another person notified by the Government
Seller of overseas tour program package has already collected TCS

The Bank will not collect TCS in case:

The remitter is liable to deduct tax at source under any other provision of the act and the amount has been deducted and proof of the same is submitted to the bank
The remitter is Government or any another person notified by the Government
Seller of overseas tour program package has already collected TCS

If remitter/ customer can avail tax credit of the TCS?

Yes, remitter / customer can claim credit for the tax collected by the Bank while filing for their tax returns as TCS is deemed to be a payment of tax on behalf of the person from whom the amount has been collected.

What if tour package/educational program etc. is subsequently cancelled or not persuaded?

The Bank will not refund TCS collected by it and paid to Government. However, credit for the same shall be available to the remitter/customer and they can claim refund by filing income tax return.

Who will be charged TCS at a higher rate?

Government of India has introduced a new section 206AB in the Finance Act, 2021 for deduction of TDS at higher rates if an amount is paid or payable to the specified person who did not file his Income Tax return in both the two previous financial year and whose aggregate TDS /TCS in each of the two previous financial years has exceeded Rs.50,000. TCS at a higher rate will be charged to such a specified person starting 1^st July 2021

Frequently Asked Questions

What is Liberalised Remittance Scheme (LRS)?

What is the effective date of applicability of the TCS on foreign remittances under LRS ?

What are the different purposes on which the tax collection is applicable?

What all transactions will be impacted by this TCS provision?

What is the new tax implication on remittances for pursuing overseas education?

What is the tax implication if the amount remitted for pursuing education abroad is owned funds or out of loans from Non-specified institutions/private parties?

What is the tax implication of remittances for the purchase of overseas tour program package under LRS?

Which transactions are included in threshold limit of Rs. 7 lakhs, above which TCS shall be applicable?

How threshold limit of Rs. 7 lakhs would be computed for FY 2020-21?

Will TCS be applicable if foreign exchange facility is availed in Cash / Forex cards?

What is the applicable TCS if PAN /AADHAR is not updated on Bank's records?

Will GST be applied on the TCS amount?

What are the scenarios under which the Bank will not collect TCS?

If remitter/ customer can avail tax credit of the TCS?

What if tour package/educational program etc. is subsequently cancelled or not persuaded?

Who will be charged TCS at a higher rate?