Why did the government introduce TCS on foreign remittances?

The primary reason for this is to monitor significant transactions and ensure compliance with tax regulations. This helps the government keep tabs on large amounts of money leaving the country for purposes such as education, travel, and investments.

Are there any exceptions to the 20% TCS rule?

Absolutely! For instance, if you're transferring money abroad for education or medical treatment, the TCS rate is reduced to 5% for amounts exceeding INR 7 lakh. And here's a bonus: if you keep your transfers below INR 7 lakh in a financial year, you won’t have to pay any TCS at all.

What documents do I need for lower TCS rates for education or medical treatment?

To get the lower TCS rates: For education: You will require proof of admission, the fee structure from the school or university, and a statement of purpose for the remittance. For medical treatment: Be sure to have the doctor’s prescription, hospital bills, and a statement of purpose for the remittance.

Can I get a refund on TCS?

Yes, you can. When you file your income tax return, you can claim the TCS paid as a credit against your tax liability. If the TCS paid is more than your tax liability, you can get a refund.

How does TCS impact students studying abroad?

For students, there’s a 5% TCS on amounts over INR 7 lakh in a financial year for education expenses. It’s important to plan your remittances carefully and keep all necessary documents to benefit from this lower rate.

Are there penalties for not following TCS regulations?

Yes, there are. If you don’t comply with TCS rules, you might face penalties, including interest on unpaid TCS and scrutiny by tax authorities. It’s important to stay compliant and keep accurate records of your remittances.

Can I split remittances to avoid TCS?

Yes, you can split remittances among family members or over different financial years to stay within the INR 7 lakh exemption limit. Just make sure everything is done legally and with proper documentation.

How can I make sure I’m following TCS regulations?

To stay compliant: Keep detailed records of all your remittances and their purposes. Consult a tax advisor to understand how TCS affects your specific situation. Regularly check for updates and new regulations from the Income Tax Department.

Category – Finance

How to Avoid 20% TCS on Foreign Remittances & Money Transfers?

Updated On:

Oct 10, 2023

Karthik

Starting October 1, 2023, foreign remittances from India will attract a fivefold increase in tax, from 5% to 20%. That would mean finding ways of meeting the increased cost for Indian residents sending money abroad while being more judicious in handling their finances. Besides the 4.5% depreciation of the Indian rupee against the US dollar in the last year, these transfers now fetch fewer dollars per rupee.

The central government, while collecting an additional $2.1 billion in revenue, would also thrive while people and businesses maintain the budget at the tightest level. Strategies include transfers below ₹7 lakhs per year, using such funds for education or a medical need, which is exempt under TCS, or, miserable, moving money to NRI accounts, which are not leviable to TCS on remittances.

Introducing moneyHOP, an exceptional digital remittance platform that provides effortless solutions for sending money internationally. It offers convenient options for remittances through non-resident Indian (NRI) accounts or foreign banks, making it easy to navigate the recently imposed 20% TCS on foreign remittances. Apart from its TCS benefits, moneyHOP outshines the competition with its competitive rates, transparent fees, instant transactions, and round-the-clock customer support. It’s the ultimate choice for sending funds overseas while effectively managing the increased TCS requirements.

Difference Between TDS & TCS

Let us try to understand the key differences between Tax Deducted at Source and Tax Collected at Source.

Aspect	TDS (Tax Deducted at Source)	TCS (Tax Collected at Source)
Definition	Mechanism wherein the tax is deducted at the source by the payer of income.	System where the government collects taxes during payment for imported goods or services.
Scope of Application	Applicable to various types of payments such as salary, interest, rent, commission, fees, and professional fees.	Applicable only when importing goods and services.
Rates	Rates are determined periodically by the government.	Rates are fixed in the Customs Tariff Act of 1975.
Responsible Entity	The payer of income is responsible for deducting TDS.	The government is responsible for collecting TCS.
Depositing Procedures	Specified under the Income Tax Act of 1961.	Specified under the Customs Act of 1962.

Calculation of TCS on Remittances

Type of Remittance Abroad	Present TCS Rate
For the purpose of education & medical treatment	5% of the amount or the aggregate amount over Rs. 7 lakh
Education when a loan is used to fund education	0.5% of the amount or the aggregate amount over Rs. 7 lakh
Overseas tour packages	5% without any threshold limit w.e.f. October 1, 2023 (20% without any threshold limit)
Any other purpose	5% of the amount or the aggregate amount over Rs. 7 lakh w.e.f. October 1, 2023 (20% without any threshold limit)

Key Ways to Avoid Paying the 20% TCS on Foreign Remittances

1. Remittance below Rs. 7 lakh

Keep your remittance less than Rs 7 lakh: If, in a year, your remittance falls below this threshold, one will not have to pay this 20 percent TCS. This is the best option if one has to transmit a small amount of money abroad.

2. Education or Medical Treatment Purposes.

Send money to pay for Education or Medical Treatment The 20% TCS will be exempt if money is being remitted towards the cost or for covering certain expenses related to medical treatments abroad. This provision can be utilized in case one is transferring money to a foreign account for financing one’s, spouse’s children’s or parents education or healthcare requirements.

3. Using credit cards

Remittances made using credit cards will be exempt from TCS as long as they do not exceed Rs. 7 lakh per financial year.

4. Utilize a resident Indian (NRI) account

Avail the facility of an NRI account first. You will be able to remit money out of the country without any charges for TCS-what a welcome relief for your wallet. Then you can check out Forex dealers. Certain Forex dealers give you waiver facilities regarding TCS on remittances and thereby permit you to dodge the tax when transferring money through them.

Understand TCS regulations so that you may keep more of your hard-earned money. Utilize these simple but effective tips in order to ensure international transfers go through as smoothly and inexpensively as possible. Why pay more when smarter choices can help you save some?

Here are some additional points to consider regarding TCS on remittances:

The bank or authorized dealer will deduct the TCS when you make the transfer.
You’ll receive a TCS certificate from the bank or authorized dealer, which will be necessary if you want to claim a refund of the TCS.
You can claim a refund for categories such as educational or medical remittances through an NRI account and transfers via a Forex dealer providing a TCS waiver.
Make sure to plan your remittances. If you anticipate sending over Rs. 7 lakh during a year, consider spreading out your remittances to family members/friends to avoid exceeding the limit.

Note – To claim a refund of the TCS, you’ll need to file an income tax return and seek reimbursement in the assessment year. When you file your tax return, it is necessary to submit the TCS certificate to the income tax authorities.

These are some of the tips that help in avoiding 20% TCS on Foreign Remittances.

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Conclusion

The recent implementation of 20% TCS on foreign remittances has made international money transfers a lot more expensive for Indians. The added cost has left many in search of smarter ways to handle remittances while minimizing the financial blow.

moneyHOP gives you a perfect solution to ease your remittance process. With competitive exchange rates and a seamless platform, moneyHOP ensures that you save on overall costs while making transfers quick and hassle-free. Its user-friendly process and efficiency in delivery enable moneyHOP to help one sail through the complexities of international transfers with ease.

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