Ans.

The Income tax Act provides for collection of tax at source (TCS) on remittances of funds under Liberalized Remittance Scheme (LRS) for the purpose of education, medical treatment, maintenance of close relative or gift transactions, personal or business travel etc. The remittance for purchase of overseas tour program package (OTP) is also covered under the LRS scheme.

Ans.

Under the LRS Scheme, Resident Individuals can avail facility of foreign exchange remittances for the purpose of education, medical treatment, personal or business travel opening banking accounts, acquire movable and immovable properties, making gift, maintenance of close relatives etc. upto USD 2,50,000/- per Financial Year (FY).

Ans.

The rates of TCS is explained with reference to the nature of permissible remittances under LRS and OTP:

Further, the threshold limit of Rs. 7 lakh is calculated as under:

-      Threshold limit of Rs. 7 lakh per FY for LRS is a combined limit on all above categories of LRS payments.

-      Except threshold limits for Rs. 7 lakh per FY for purchase of Overseas tour program package is an independent limit and shall apply separately.

Notes:

Note 1: Remittances for purpose of education shall include:

1.    Remittances for purchase of tickets of the person undertaking study overseas for commuting between India and the overseas destination;

2.    The tuition and other fees to be paid to educational institute abroad; and

3.    Other day to day expenses required for undertaking such study like food, accommodation, local transport, health services required by students while residing abroad etc.

However, where the person receiving education does not travel overseas, it shall cover payment of fees for correspondence courses abroad and TCS shall apply on such transaction as well.

Note 2: Remittance for the purpose of medical treatment shall include:

1.    Remittance for purchase of tickets of the person to be treated medically overseas and his/her attendant for commuting between India and overseas destination;

2.    His/her medical expenses; and

3.    Other day to day expenses required for such purpose like food, accommodation, local transport transactions, other healthcare and medical services.

However, where no travel by patient is involved, it shall cover remittances for health services rendered by hospitals, doctors, nurses, paramedical etc. remotely and TCS shall apply on such transaction as well.

Note 3: This includes maintenance of close relative or gift transactions, purchase of movable and immovable properties, opening banking accounts and deposits etc. subject to prescribed guidelines.

Ans.

No.

The term ‘overseas tour program package’ is defined as 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 expenditure of similar nature or in relation thereto.

It is clarified that purchase of only international travel tickets or purchase of 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:

1.    International travel tickets

2.    Hotel accommodation (with or without food)/boarding/lodging

3.    Any other expenditure of similar nature or in relation thereto

Ans.

1.    An authorized dealer, who receives an amount, for remittance under the LRS Scheme

and

2.    Seller of overseas tour package i.e. travel agent, who receives an amount from buyer for purchase of overseas tour package. 

Ans.

The higher TCS rate is applicable in a case where:

-      If a person fails to furnish PAN

-      If a person furnishes invalid/in-operative PAN

-      In case of person whose aggregate TDS/TCS is 50,000/- or more during the FY but he has failed to furnish return of income of previous FY and time limit to file the return of income of such previous FY is also expired under Section 139(1) of the Income-tax Act, 1961 (known as specified person) 

In all the above cases, the TCS is required to be deducted at

1.    Twice the applicable TCS rate or

2.    5%

Whichever is higher

However, the maximum TCS deduction rate is capped at 20 percent in all the cases.

The applicable TCS Rate for above cases is tabulated below for easy reference:

Ans.

Yes. Credit of TCS is allowed to the person from whom such tax has been collected.

Ans.

Yes. In a case where minor’s income is clubbed with the income of the parents, TCS collected on minor’s PAN can be claimed by his/her parent.

The parent can claim credit of such TCS deducted in minor’s PAN by giving appropriate disclosure in their ROI in Schedule - “Tax payments”.

Ans.

No, the limit shall apply for entire FY 2023-24, that means if threshold of Rs. 7 Lakhs has already been exhausted in 1^st Half; all subsequent remittances under LRS in 2^nd Half, would be liable for TCS at rate applicable from October 1, 2023.

Ans. The CBDT has clarified that No TCS shall apply on expenditure through international credit card till any further order. 

Ans.

No. TCS is applicable to remittances made under the LRS Scheme by Resident individuals only.

- Updated 01/2024