Central Board of Direct Taxes vide circular dated 30th June, 2023 has clarified that for first Rs. 7 lakh remittance under LRS there shall be no TCS. Beyond this Rs 7 lakh threshold, TCS shall be at the rate of –
- 0.5% (if remittance for education is financed by loan taken from a financial institution;
- 5% (in case of remittance for education/medical treatment;
- 20% for others.
FAQs are published to provide following clarifications:
- Question 1: Whether payment through overseas credit card would be counted in LRS? Answer: According to a press release dated 28th June 2023, the classification of using an international credit card overseas as part of LRS has been postponed. This means that no TCS shall be applicable on expenditure made through an international credit card while being overseas until further notice.
- Question 2: Whether the threshold of Rs 7 lakh for TCS to become applicable on LRS applies separately for various purposes? Answer: The threshold of Rs 7 lakh for TCS to become applicable on LRS is a combined threshold. It is not specific to each purpose like education, health treatment, or others. The amendment by the Finance Act, 2023 initially restricted the threshold to education and medical treatment purposes, but after the recent press release, the old position has been restored. Therefore, regardless of the purpose, remittances up to Rs 7 lakh under LRS in a financial year will not be liable for TCS. However, any subsequent remittance beyond Rs 7 lakh will be subject to TCS at the applicable rates.
- Question 3: Whether the threshold of Rs 7 lakh for TCS to become applicable on LRS applies separately for each six months? Answer: No, the threshold of Rs 7 lakh for TCS to become applicable on LRS applies for the full financial year. If the threshold has already been exhausted, all subsequent remittances under LRS, whether in the first half or second half of the financial year, will be liable for TCS at the applicable rate.
- Question 4: Whether the threshold of Rs 7 lakh for TCS to become applicable on LRS applies separately for each remittance through different authorized dealers? Answer: The threshold of Rs 7 lakh for LRS applies to the remitter, not the authorized dealer. The authorized dealer should collect the tax at source based on the information provided by the remitter. Although the real-time update facility for remittances under LRS is still under development by the RBI, the authorized dealer can collect details of earlier remittances through an undertaking from the remitter. If the authorized dealer collects the TCS based on this information, they will not be treated as “assessee in default.” However, providing false information in the undertaking may result in appropriate action against the remitter.
- Question 5: Whether the thresholds for TCS on LRS and the purchase of overseas tour program packages apply independently? Answer: Yes, the thresholds for TCS on LRS and the purchase of overseas tour program packages apply independently. The threshold of Rs 7 lakh for TCS on LRS determines its applicability, while the threshold of Rs 7 lakh for the purchase of overseas tour program packages determines the applicable TCS rate (5% or 20%).
- Question 6: Whether TCS is applicable if a resident individual spends Rs 3 lakh for the purchase of an overseas tour program package classified under LRS? Answer: Yes, TCS is applicable in this case. For the purchase of overseas tour program packages classified under LRS, the TCS provision for such purchases will apply, not the TCS provisions for remittances under LRS. Since the total amount spent onthe purchase of the overseas tour program package is less than Rs 7 lakh, the TCS rate applicable would be 5%. The seller of the package should collect the TCS at this rate.
- Question 7: What is the scope of remittance under LRS for medical treatment and education purposes? Answer: For remittance under LRS for medical treatment purposes, it includes the following expenses:
- Purchase of tickets for the person to be treated medically and their attendant for travel between India and the overseas destination.
- Medical expenses related to the treatment.
- Other day-to-day expenses required for the medical treatment.