Is TCS applicable on foreign remittance?

The tax rate collected at source on money transferred abroad under the Liberalised Remittance Scheme is proposed to rise substantially from 5 percent to 20% in Budget 2023. Let's first examine the idea of TCS to see what is TCS on foreign remittance RBI circular.

Is TCS applicable to foreign remittances?

The government imposed TCS on LRS remittances as of October 1, 2020, per Budget 2020. Since that time, banks are required to deduct tax at the rate of 5% when sending money under the LRS for an amount greater than Rs 7 lakh.

TCS is not a separate tax. It is comparable to TDS, or tax withheld at source. The tax collected is deducted from your tax burden and credited to your account with the authorities. The government has proposed in the most recent budget a considerable hike in the TCS rate on overseas remittances to 20% starting on July 1, 2023. This tells you if is TCS applicable on foreign remittances.

A TCS (Tax collected at source) of Rs. 6,000 will be applicable starting on July 1st, 2023 if you intend to send in Rs. 30,000. If your income is subject to a tax of Rs.7,000, the TCS of Rs. 6,000 will be adjusted, and you will only be required to pay a further tax of Rs. 1,000. 

How will this affect you starting on July 1st, 2023?

Consider you are converting INR to another currency for any reason, including investing in listed stocks. The Bank is required to collect TCS at a rate of 20% on the total amount of remittances sent during a financial year under the recently proposed Budget 2023. Example: if you wish to transfer and convert Rs.20 lakh to USD. On Rs.20 lakh, the bank will deduct a 20% TCS. In this case, the TCS would be Rs. 4,00,000.

You must have understood TCS on foreign remittance RBI circular.