20% TCS on foreign remittances from October 1: Know how it will impact your forex payments, international trips, and education

The new rates of tax collected at source (TCS) under the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India will be applicable from October 1, 2023. You will now have to pay a higher TCS amount in case you spend more than a specified amount during a financial year with regard to international trips, going abroad for higher studies or making a credit card payment for a purchase from a foreign country, among others.

It’s important to understand how the enhanced tax rates on foreign remittances will impact your expenses on education abroad, foreign trips and forex payments to avoid any financial uncertainties.

New TCS rates on foreign remittance for education

Under the Liberalised Remittance Scheme (LRS), no TCS would be charged on up to Rs 7 lakh of foreign remittance spent on education. In case the remittance above Rs 7 lakh is paid via a loan from an authorised financial institution then a TCS of 0.5 per cent would be levied. While, remittances of more than Rs 7 lakh spent on foreign education would attract a TCS of 5 per cent from October 1, 2023. Moreover, the amount spent on travelling for foreign education would also be taxed at the same rate if the threshold of Rs. 7 lakh is crossed.

Revised TCS rates for medical expenses

A 5 per cent TCS would be charged on any foreign remittance for medical expenditure if the cost is higher than Rs 7 lakh. Also, any travel expenses related to foreign treatment will also be taxed at the same rate from October 1, 2023.  

TCS rates for overseas tour package

An overseas tour package would also attract TCS. However, the catch is that even if the money spent on these packages is lower than Rs 7 lakh, one is liable to pay the taxes. If the tour package is priced below the threshold, the TCS deducted would be 5 per cent. Conversely, if the expenditure is over Rs 7 lakh, 20 per cent TDS would be levied from October 1, 2023.

What are the TCS rates for foreign investments?

If you're an investor in foreign stocks, crypto or mutual funds then be ready to pay TCS of 20 per cent from October 1, 2023, if your investments exceed Rs 7 lakh in a financial year. On the other hand, if you have invested in Indian mutual funds that deal in foreign investments, it won't be considered as a remittance under the LRS scheme and hence, wouldn't attract any TCS.

TCS on debit, credit, and forex cards

The payments made by credit cards don't come under the scope of the LRS. However, payments made using debit, credit or forex cards do come under the ambit of LRS and if you pay more than Rs 7 lakh using these cards then TCS will be applicable at 20 per cent.