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ITR filing: New Income Tax Rule: Key Considerations for Sending Money Outside India

Effective from July 1, 2023, a new income tax rule will be implemented for overseas remittances under India's liberalised remittance scheme. With the exception of medical and educational expenses, a 20% tax collected at source (TCS) will be applicable to all such remittances. Furthermore, the TCS will also be levied on credit card transactions conducted outside of India. Stay informed about these important updates for smooth ITR filing and compliance.
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Commencing July 1, 2023, a new regulation mandates a 20% Tax Collected at Source (TCS) on all foreign remittances, excluding those made for educational and medical reasons.

Latest updates News: Effective from July 1, 2023, all international remittances made under the liberalised remittance scheme (LRS) will be subjected to a 20% Tax Collected at Source (TCS), except for remittances made for medical and educational purposes. However, if the annual threshold of ₹7 lakh is surpassed, a 5% TCS will be levied on medical and educational remittances. Stay informed about these recent changes for ITR filing and ensure compliance when sending money overseas.

Starting from July 1, 2023, any foreign remittance, excluding those for educational and medical purposes, will be subject to a 20% Tax Collected at Source (TCS). This means that individuals sending money abroad for acquiring shares or property will have to pay an additional 20% of the remittance amount. For instance, if someone sends ₹10,00,000 outside India, the bank will collect ₹12,00,000 (₹10,00,000 as the actual amount and ₹2,00,000 as TCS). However, this additional amount can be claimed as a tax credit when filing the sender's tax return. For example, if the total tax payable is ₹3,00,000, only ₹1,00,000 would need to be paid as ₹2,00,000 can be claimed as a tax credit similar to TDS claims, as explained by Archit Gupta, Founder and CEO of Clear. Stay aware of these changes for smooth ITR filing and compliance.

India has implemented a policy aimed at monitoring and limiting high-value international credit card transactions. This initiative serves multiple purposes, including safeguarding foreign exchange reserves, curbing money laundering, increasing tax revenue, and encouraging more income tax filings. Failure to submit an income tax return may result in future income being subjected to higher Tax Deducted at Source (TDS) or Tax Collected at Source (TCS) rates, with a minimum rate of 20%. If the TCS from such remittances amounts to ₹50,000 or more, the new regulations will apply. Vinit Khandare, CEO and Founder of MyFundBazaar, highlighted the significance of these measures. HDFC Bank has also notified its customers about the revised TCS rates applicable to foreign remittances under the Liberalised Remittance Scheme (LRS) starting from July 1, 2023. Stay informed about these changes to ensure compliance.

HDFC Bank has provided a clear explanation of the new provisions on its official website. Here are the different types of remittances and their respective Tax Collected at Source (TCS) rates starting from July 1:

1. In the case of educational remittances funded by a loan obtained from a specified institution (as defined in Section 80E), a TCS rate of 0.5% will be imposed on the remittance amount or the total amount exceeding ₹7 lakh in a financial year. Stay updated on these regulations to ensure compliance when making educational remittances.

2. For non-loan education expenses or medical treatment purposes, a TCS rate of 5% will be applicable on the total amount or aggregate amount exceeding ₹7 lakh per financial year.

3. For overseas tour packages, a flat TCS rate of 20% will be imposed without any threshold limit of ₹7 lakh per financial year.

4. For any other purpose under the Liberalised Remittance Scheme (LRS), a TCS rate of 20% will be applicable without any threshold limit of ₹7 lakh per financial year.

5. Individuals falling under the "Specified Person" category, non-PAN cases, or inoperative PAN cases will face a TCS rate double the normal rate or 5%, whichever is higher, with a maximum limit of 20%.

In addition, the income tax department is considering a proposal that would require credit card holders to declare their foreign currency expenses to the issuer within a specified time. This declaration would help determine the applicability of TCS, as reported by PTI. Stay informed and ensure compliance with these guidelines for smooth financial transactions.