New TCS Rule: The government is ready to implement the new Tax Collected at Source (TCS) rules from October 1, 2023. Information about this new change was given in the budget at the beginning of this year. The new rules are part of the government’s efforts to increase tax collection and broaden the tax base. Let us understand the key provisions of the new rules and their impact on people.
TCS used to be applicable on transactions related to sale of goods, but from October 1, many other types of services, e-commerce related transactions and foreign transactions have also been included in its scope.
TCS is a system through which the government ensures tax collection at source from certain categories of sellers.
How much has TCS increased?
In the Union Budget 2023, it has been proposed to increase the TCS rate from 5% to 20% for all outward remittances except remittances for education and medical purposes. For education and medical expenses, the lower rate of 5% will be applicable on amounts above Rs 7 lakh.
No TCS will be levied for education and medical education up to Rs 7 lakh. TCS will be levied at a lower rate of 0.5% on any expenditure above Rs 7 lakh if the education is financed by a loan taken from a financial institution and if the expenditure is without the aid of any loan then TCS will be levied at the rate of 5%.
Further, the Government has clarified that in addition to travel tickets and tuition fees for movement between India, the cost of education also includes ancillary expenses such as food, accommodation, local transport and health services availed by resident students during their stay abroad. Will be included.
5% TCS rate will be levied on medical expenses exceeding Rs 7 lakh. No TCS on expenditure up to Rs 7 lakh.
Convenience will become expensive:
International travel programs (Overseas Tour Program Packages) will become expensive and now TCS on foreign tour packages will attract a higher TCS rate of 20% instead of 5% if the total expenditure is more than Rs 7 lakh. However, if the total cost of the package is less than Rs 7 lakh then the rate of 5% will be applicable.
It has been clarified by the Government that purchase of international travel tickets and hotel booking on standalone basis will not qualify as OTPP.
Simply understand,
the new TCS (Tax Collected at Source) rules are important for planning international travel, investing in foreign stocks, mutual funds, cryptocurrencies abroad or pursuing higher education abroad. If someone spends more than a certain amount in a financial year, TCS will be applicable on it. However, according to the Finance Ministry, TCS will not be levied on travelers using international credit cards during foreign trips.
According to the Liberalized Remittance Scheme of the Reserve Bank of India (RBI), one can send money abroad up to $250,000 every year. But from October 1, TCS of 20% will be levied on any expenditure above Rs 7 lakh for purposes other than medical and education.
