The government on Wednesday proposed to hike the TCS rate to 20 percent from 5 percent currently on overseas tour packages and a liberalized remittance scheme for the remittance of funds out of India.
The Finance Bill, through the Budget 2023-24, amended Section 206C of the Income Tax Act levying a higher Tax Collected at Source (TCS) on overseas tour programme packages.
Also, 20 percent TCS will be applicable in cases where funds in excess of Rs 7 lakh are sent out of India under the Liberalised Remittance Scheme of the RBI.
The amendments will come into effect from July 1, 2023.
Nangia Andersen India Partner Amit Agrawal said the increase in TCS rate to 20 percent is a big surprise, especially with the comfortable forex position.
”The increase in TCS rates to 20 percent for overseas travel perhaps underscores the government’s intention to restrict overseas travel spending by HNI’s,” Agarwal said.
Agarwal said the step to increase TCS to 20 percent for all remittances, other than travel and medical is likely to cause resentment and hardship amongst the middle class and HNIs.
”This is especially true since many students aspire for foreign education and the cost of education and living is usually met by parents through LRS, the blanket rate of 20 percent on all residuary remittances would mean that foreign remittance for education/maintenance is likely to be costlier owing to the 20 percent TCS,” Agrawal said.
Deloitte India Partner Neeru Ahuja said TCS on overseas tour packages or liberalized remittance scheme for remittance of funds out of India has been proposed to be increased from 5 percent to 20 percent.
”Despite the TCS being creditable in the hands of taxpayers, the same shall lead to higher cash outflow at the first instance in the hands of taxpayers,” Ahuja said.
Tax and consulting firm AKM Global, Tax Partner Amit Maheshwari said, ”TCS has been proposed on any foreign payment without any threshold.
”This would pose challenges for people intending to go for foreign travel and who wish to invest in overseas stocks as it will increase their immediate outlay,” Maheshwari said.
