1) TCS on foreign remittances is applicable only when foreign exchange is remitted abroad under the LRS scheme.
2)
The rate of TCS applicable from July 1,
2023, is 20%
3)
Prior to the amendment by Finance Act,
2023, the applicable TCS rate was 5%
4) In
case of the following transactions No change has been made, i.e. the existing
rate of 5% prevails:
(i) Education
(ii) Medical
treatment
5)
In case loan is taken for education
purposes from financial institutions defined
u/s 80E, then rate of TCS will be 0.5%
6) In
case of the following transactions subject to limit TCS is not attracted
(i) Payment
from debit/credit card upto 7 Lakh per financial year
(ii) Purchase
of goods and services from foreign websites.
7)
Credit of TCS is allowed in the return of
income.
8)
The purpose for remitting funds abroad can
be travel expenditure, asset purchase, shopping and investment or any other.
9)
In order to clear the ambiguity regarding
the application of the enhanced TCS rate for Business Travel abroad, CBDT has
released a FAQ on May 18, 2023. And in Part B, Q6 on Page 5., it has been clarified that when
an employee travels abroad for official purpose and the expense is borne by the
Company, such expense is to be excluded in the hands of the employee subject to
verification by AD Banker. In short, foreign business visits by employees are
not covered under the Liberalized Remittance Scheme (LRS) and hence are not
subject to TCS.
10) The
Employer is required to maintain sufficient documentation to demonstrate the fact
that the foreign travel undertaken was for Bonafide Business Purpose only.
Documentation in this regard would include, but not limited to the following:
(i) Business
Necessity of such travel along with appropriate approvals
(ii) Itinerary
of the Proposed travel along with approvals for such travel.
(iii)
Details of work undertaken while
travelling abroad.
(iv) Travel
and Room Accommodation should be taken care of by the employer directly to
ensure that the cost is directly booked by the employer.
11) Practical
Challenge
(i)
Bank not able to identify which expense is
for business & personal and as a matter of caution may collect TCS in the
credit card statement.
(ii)
Corporate credit card in general issued in
the name & pan of the employee and hence bank may consider TCS on entire
foreign spending.
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