Tax Collected at Source (TCS) on Liberalized Remittances Scheme (LRS)
Key Points:
- TCS shall be effective from October 01, 2020. Therefore, TCS will not be collected on any amount of foreign remittances until September 30, 2020
- TCS shall be applicable on foreign remittance amount in excess of INR 7 Lacs in a Financial Year (FY) as per the Liberalized Remittances Scheme (LRS)
- For FY 20-21, if a remittance under LRS exceeds INR 7 Lacs, post October 01, 2020 will attract TCS
- All transactions falling under LRS, will attract 5% TCS on the INR amount remitted / transacted including on debit cards
- In case, the purpose is education through loan obtained from any financial institute, rate of TCS shall be 0.5%, subject to the documents provided
- Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 vide an e-gazette notification dated May 16, 2023 and subsequently, the Ministry of Finance vide its Circular No. 10 of 2023 dated June 30, 2023 has notified, to increase Tax Collection at Source (TCS) @20% from earlier @5% for outward remittance under Liberalized Remittance Scheme (LRS) with effect from October 1, 2023
Key changes are as below:
| Sr. No. | Purpose of Remittance | Present TCS rate applicable up to September 30th, 2023 | Proposed TCS Rate w.e.f. October 1st, 2023 |
| i. | Overseas tour package |
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| ii. | Any other purpose of remittance under LRS other than Education and Medical treatment |
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| iii. | For the purpose of any education, if the amount being remitted out is a loan obtained from any financial institution as defined in section 80E |
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| iv. | For the purpose of education, other than (iii) or for the purpose of medical treatment |
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Frequently Asked Questions (FAQs):
Tax collection at source (TCS) on LRS transactions is a regulatory requirement, amended under section 206C of the Finance Act 2020.
TCS is applicable from October 01, 2020.
- Any LRS txn done till September 30, 2020 will not attract TCS
- For FY 20-21 till September 30, 2020, if a remitter has already remitted more than INR 7 Lacs then starting October 01, 2020 any transaction done by that remitter will attract TCS
0.5% TCS is applicable if loan from a financial institute is obtained for the purpose of education.
5% TCS is applicable for all purposes of LRS remittances, also including education payments without obtaining loan.
10% TCS is applicable, where PAN card is not provided. However, RBL Bank does not process any LRS remittance without PAN card.
TCS is applicable on the total INR amount remitted. TCS is applicable only if the INR amount remitted is more than INR 7 Lacs in a Financial Year.
No. TCS is applicable only on remittances falling under LRS.
No. GST is not be applicable on the TCS amount. However, GST will continue to be applied on existing processing and correspondent banking charges.
Remitters may claim credit for tax collected by the bank while filing their income tax returns.
Remitters to consult their tax advisor/consultant for further information.
RBL Bank will email / courier TCS certificate to the remitters on their email ID / registered address maintained with the Bank.
TCS will not apply in case the remitter is liable to deduct tax at source under any other provision of the Income Tax Act.
TCS will not apply if the remitter is Government or any another person notified by the Government.
Case 1:
- Remitter A does his 1st LRS transaction in May 2020 for INR 6 Lacs = No TCS
- Remitter A does his 2nd LRS transaction in September 2020 for INR 5 Lacs = No TCS
- Remitter A does his 3rd LRS transaction in October 2020 for INR 2 Lacs = TCS will be applicable on INR 2 Lacs
(6 Lacs + 5 Lacs = 11 Lacs. As the limit of INR 7 Lacs in a financial year is crossed, any remittance made on or after October 01, 2020 will attract TCS)
Case 2:
- Remitter B does his 1st LRS transaction in August 2020 for INR 3 Lacs = No TCS
- Remitter B does his 2nd LRS transaction in October 2020 for INR 3 Lacs = No TCS
(3 Lacs + 3 Lacs = 6 Lacs. As the limit of INR 7 Lacs in a financial year is not crossed, TCS will not be applied on any payment)
Case 3:
- Remitter C does her 1st LRS transaction in October 2020 for INR 6 Lacs = No TCS
- Remitter C does her 2nd LRS transaction in November 2020 for INR 5 Lacs = TCS will be applicable on INR 4 Lacs
(6 Lacs + 5 Lacs = 11 Lacs – 7 Lacs = 4 Lacs. As the limit of INR 7 Lacs was crossed in the second payment, TCS will be applied on the partial amount)
