Synopsis:-
The Union Budget FY 2021 has introduced a new Tax Collected at Source (TCS) provision on foreign remittance with effect from Oct 1, 2020. As per the mandate, a 5 % (where PAN/ Aadhaar of customer i.e remitter is available) tax collection at source has to be done for all outward remittances over INR 7 lakh, done under the Liberalised Remittance Scheme (LRS), except if it is remitted for the purpose of pursuing education through a loan obtained from any financial institute, then the rate of TCS shall be 0.5%. The same will be collected by Remitter Bank.
If PAN / Aadhaar of the customer i.e. remitter is not available, then
TCS shall apply at a higher rate of 10%.
Key points on the new tax provision:
1. TCS shall be applicable on the amount in excess of Rs 7 lakh in a financial year and not on the total amount.
2. In cases where the amount is remitted for the purpose of pursuing education through a loan obtained from any financial institute, the rate of TCS shall be 0.5% on the amount exceeding Rs 7 lakh.
3. Remitter can claim credit for the tax collected by the Bank, where PAN/ Aadhaar is provided while filing income tax returns (ITR) in India.
4. TCS is applicable at PAN level and not Account level
