HDFC Bank has explained the new 20% TCS provision for forex withdrawals/remittances. Let’s have a look
From July 1, certain changes to the Tax Collection at source (TCS) on Forex withdrawals/ remittances by Resident Individuals under LRS (Liberalised Remittance Scheme) will become effective. HDFC Bank has explained the new provisions on its official website. Let’s look at what the bank says.
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Types of Remittances and TCS rate from July 1
1. For education, if the amount being remitted is from a loan obtained from any specified institution as defined in Section 80E: 0.5% TCS will apply on the amount or the aggregate amount over Rs 7 lakh per financial year
2. For the purpose of education, other than the above (when the amount is not obtained via education loan) or for the purpose of medical treatment: 5% TCS on the total amount or the aggregate amount over Rs 7 lakh per financial year.
3. Overseas tour packages: 20% TCS without any threshold limit of Rs 7 lakh per financial year
4. Any other purpose under LRS: 20% TCS without any threshold limit of Rs 7 lakh per financial year.
5. Resident Individual falling under “Specified Person” category/Non-PAN case/ inoperative PAN case: Double the normal rate of TCS or 5%, whichever is higher. However, TCS rate will not exceed 20%.
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Who is the specified person?
The “specified person” in this case (point 5) means a person who satisfies the following two conditions:
- The person has not furnished Income Tax Return (ITR) for the assessment year relevant to the previous year immediately preceding the financial year in which tax is required to be deducted/collected. The previous year to be counted is required to be the one whose return filing date under sub-section(1) of section 139 has expired.
- The aggregate of TDS and TCS is Rs 50,000 or more in that previous year.
What is the aggregate Rs 7 lakh threshold?
As per the details shared by the bank, the threshold limit of Rs 7 lakh on LRS Remittances would be applied on withdrawals from the bank and not via the authorised dealer.
The HDFC Bank said, the threshold limit of Rs 7 lakh per financial year mentioned in points 1 and 2 above is the aggregate threshold of all Forex withdrawals by the customer under LRS from HDFC Bank across all the products such as Outward Remittances, Forex Cards, FCY Cash, FCY DD, Debit Card – International Spends.
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Mayank Mohanka, Founder Director of taxaaram.com, also shared this in a tweet. “So, finally a stamp of approval on my understanding that the threshold exemption limit of Rs. 7 lakhs for TCS on LRS Remittances is applicable qua the Remitter & not qua the authorised dealer, by HDFC Bank,” wrote Mohanka.
Also, the user’s PAN should be valid and operative from 1 July 2023. The HDFC Bank will check validity of PAN in terms of whether Aadhaar is linked to PAN or not. In case PAN is inoperative, TCS would be charged at the rate applicable to Non-PAN case, the bank said.
