2023-05-18 15:04:21
Parents who regularly remit money for their children’s education abroad are in for some respite. Finance Ministry has clarified that rate of Tax Collected at Source (TCS) for travel and incidental expenses related to education and medical treatment will be the same as that on remittances for education and medical treatment.
Remittances under Liberalised Remittance Scheme (LRS) attract TCS. Rates of TCS vary between 0.5 to 20 per cent and an Indian resident can remit up to $2,50,000 under LRS. Although, Union Budget 2023-24 brought regarding changes in TCS rates for some purposes outside the purview of education and medical expenses such as purchase of an overseas tour package, it kept the rate unchanged for education and medical related expenses. The new regime is coming into effect from July 1, 2023.
Remittances up to ₹7 lakh for education attracts TCS at the rate of 0.5 per cent, in case of money sourced from education loan and 5 per cent in case of one’s own money. Similarly, remittance of medical expenses up to ₹7 lakh attracts TCS at the rate of 5 per cent.
However there remained a lack of clarity on TCS rates in case of money remitted for travel and incidental expenses apart from tuition fee and treatment charges. Now, the Finance Ministry has said, “For TCS on remittances for travel and incidental expenses related to education and medical treatment, the rates of TCS as applicable to remittances for education and medical treatment, respectively, shall apply.” This means rate of TCS on such expenditure will be 0.5 or 5 per cent. The Ministry also added that a detailed clarification will be issued separately. Incidental expenses are gratuities and other minor costs in addition to major expenses such as hotel fees and ticket prices. They are considered ancillary to the costs of transportation, meals and lodging.
Reasons
Talking regarding reasons behind amendment ofTCS provisions through Finance Act, the Ministry said that such instances have come to notice where the LRS payments are disproportionately high when compared to the disclosed incomes. “The primary impact is only on investment in assets such as real estate, bonds, stocks outside India by HNI and tour travel packages or gifts to non-residents,” it said.
It may be noted that payment of TCS is not a final tax. If the TCS payee is a taxpayer, he can claim credit for the TCS as his tax payment once morest regular income and adjust it once morest the advance tax etc., payments accordingly. The Ministry said if the TCS is of a person not being a taxpayer, then the 20 per cent rate on such presumed income is not high. The tax rate slab of 20 per cent starts in the new regime for incomes over ₹12 lakh and is 30 per cent for incomes over ₹15 lakh.
1684445980
#Remittances #travel #incidental #expenses #related #education #medical #treatment #attract #TCS #rate #education #medical #treatment
