The government had introduced the Liberalised Remittance Scheme (LRS)way back in 2004 to enable residents Indians to remit money outside India without seeking approval from RBI.
Under the scheme, resident individuals can remit up to $250,000 in a financial year under various heads including current account transactions such as going overseas on employment, studies overseas, emigration, maintenance of close relatives, medical treatment, among others. They can also transfer money for capital account transactions like opening of foreign currency account overseas with a bank, purchase of property and making investments in shares, units of mutual funds, venture capital funds, among others.
This scheme has been very popular with parents having students studying abroad as they have been using this route to conveniently remit funds to pay for their fees and other expense. In recent times, remittance under the scheme has increased significantly, especially for investments in real estate and immigration. The current pandemic has further prompted many investors to look at diversifying their investment/business globally at the same time taking advantage of distress sale opportunities available worldwide.
The government, in the Union Budget 2020, has introduced Tax Collection at Source (TCS) on remittance under the LRS. This requires the remitting bank to collect a 5 percent tax on remittances aggregating to Rs 7 lakh or more in a financial year. TCS is a provision in the Income-tax Act, which requires the receiver of funds (unlike TDS which requires payer) to deduct tax from the amount received and deposit it with the government for the credit of the payer. This tax can then be adjusted against the normal tax payable and the excess, if any, can be claimed as refund.
TCS does not mean that you will have to pay additional taxes. However, it could result in a shortfall in the amount remitted by you and cause some inconvenience due to compliance and delays in case of refunds.
This change was to be effective from Apr 01, 2020. However, as a part of the Covid19 relief measures announced by the government, the provision of TCS shall now be effective from October 1, 2020, instead of April 1, 2020.
Hence if you are looking at remitting any funds outside India, It makes sense to do so before October 1, 2020, so as to avoid TCS and related procedural issues.
๐๐ผ๐ฟ ๐ฎ๐ป๐ ๐ฎ๐๐๐ถ๐๐๐ฎ๐ป๐ฐ๐ฒ ๐ผ๐ป ๐ฟ๐ฒ๐บ๐ถ๐๐๐ฎ๐ป๐ฐ๐ฒ ๐ธ๐ถ๐ป๐ฑ๐น๐ ๐ฐ๐ผ๐ป๐๐ฎ๐ฐ๐ ๐๐. ๐ช๐ฒ ๐ฐ๐ฎ๐ป ๐ต๐ฒ๐น๐ฝ ๐๐ผ๐ ๐๐ถ๐๐ต ๐ผ๐ฝ๐ฒ๐ป๐ถ๐ป๐ด ๐๐ฎ๐ป๐ธ ๐๐ฐ๐ฐ๐ผ๐๐ป๐๐ ๐ถ๐ป ๐๐ฎ๐ป๐ฎ๐ฑ๐ฎ, ๐จ๐ฆ ๐ฎ๐ป๐ฑ ๐จ๐ ๐ฎ๐ป๐ฑ ๐๐ฒ๐ป๐ฑ ๐ณ๐๐ป๐ฑ๐ ๐๐ผ ๐๐ต๐ผ๐๐ฒ ๐ฎ๐ฐ๐ฐ๐ผ๐๐ป๐๐ ๐ณ๐ฟ๐ผ๐บ ๐๐ต๐ฒ ๐ฐ๐ผ๐บ๐ณ๐ผ๐ฟ๐ ๐ผ๐ณ ๐๐ผ๐๐ฟ ๐ต๐ผ๐บ๐ฒ/๐ผ๐ณ๐ณ๐ถ๐ฐ๐ฒ ๐ต๐ฒ๐ฟ๐ฒ ๐ถ๐ป ๐๐ป๐ฑ๐ถ๐ฎ.