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.
𝗙𝗼𝗿 𝗮𝗻𝘆 𝗮𝘀𝘀𝗶𝘀𝘁𝗮𝗻𝗰𝗲 𝗼𝗻 𝗿𝗲𝗺𝗶𝘁𝘁𝗮𝗻𝗰𝗲 𝗸𝗶𝗻𝗱𝗹𝘆 𝗰𝗼𝗻𝘁𝗮𝗰𝘁 𝘂𝘀. 𝗪𝗲 𝗰𝗮𝗻 𝗵𝗲𝗹𝗽 𝘆𝗼𝘂 𝘄𝗶𝘁𝗵 𝗼𝗽𝗲𝗻𝗶𝗻𝗴 𝗕𝗮𝗻𝗸 𝗔𝗰𝗰𝗼𝘂𝗻𝘁𝘀 𝗶𝗻 𝗖𝗮𝗻𝗮𝗱𝗮, 𝗨𝗦 𝗮𝗻𝗱 𝗨𝗞 𝗮𝗻𝗱 𝘀𝗲𝗻𝗱 𝗳𝘂𝗻𝗱𝘀 𝘁𝗼 𝘁𝗵𝗼𝘀𝗲 𝗮𝗰𝗰𝗼𝘂𝗻𝘁𝘀 𝗳𝗿𝗼𝗺 𝘁𝗵𝗲 𝗰𝗼𝗺𝗳𝗼𝗿𝘁 𝗼𝗳 𝘆𝗼𝘂𝗿 𝗵𝗼𝗺𝗲/𝗼𝗳𝗳𝗶𝗰𝗲 𝗵𝗲𝗿𝗲 𝗶𝗻 𝗜𝗻𝗱𝗶𝗮.