If you are sending more than ₹6 lakh abroad then it is likely to fall under the ambit of income tax. Central Board of Direct Taxes The Central Bank of Thailand (CBDT) has reportedly launched a thorough investigation into high-value foreign remittances above ₹6 lakhs, Business standard reported.
According to the report, the top direct tax agency is cracking down on foreign remittances to detect discrepancies between what taxpayers disclose and the actual data.
This highlights the higher rate of TCS (tax collected at source) imposed by the Ministry of Finance on high-value remittances, effective since last year.
TCS highest in remittances ₹7 lakh
It is noteworthy that the Ministry of Finance implemented changes regarding the Tax Collected at Source (TCS) last year with effect from October 1, 2023 to impose a tax rate of 20 percent on remittances above ₹7 lakhs.
The higher tax rate was due to come into effect on 1 July, but was then postponed by three months, until 1 October.
Previously, the TCS rate was 5 percent for these transactions. In fact, it had initially involved Expenses through credit cardsHowever, following the backlash, the government excluded credit card payments from LRS limits, thereby avoiding the higher TCS rate.
Exemption from higher TCS when remitting more than ₹7 lakh
The Finance Ministry had also exempted certain categories of expenses from a higher tax rate, such as medical expenses and education.
What is LRS?
Under the RBI’s Liberalised Remittance Scheme (LRS), all resident persons can freely remit up to $250,000 in a financial year for any permissible current or capital account transaction or a combination of both.
What is a TCS?
This is an additional tax imposed by the seller on the sales price of a specific product or service. It is collected at the time of sale and then deposited with the tax authorities.
However, the TCS paid can be adjusted against the individual’s tax liability at the time of filing an income tax return. Therefore, if the total tax liability turns out to be less than the TCS, the taxpayer will be eligible to get a tax refund.
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