Important changes w.r.t Liberalised Remittance Scheme (LRS) and Tax Collected at Source (TCS)

Few modifications were introduced to the Tax Collection at Source (TCS) system for payments made under the Liberalised Remittance Scheme (LRS) and for overseas tour program packages in the present fiscal year’s budget. These were to take effect from 1st July 2023 as per the initial announcement. Additionally, in March 2023, it was declared that credit card transactions would be included within the scope of the Liberalised Remittance Scheme (LRS).

However, a recent update states that the TCS rate will remain unchanged for all LRS purposes and for international trip tour packages, independent of the method of payment, for sums up to Rs. 7 lakh per person per year.

Additionally, TCS would not apply to transactions made with international credit cards when travelling abroad because they would not be considered LRS.

Regardless of the purpose, the threshold of Rs. 7 lakh per financial year per person in clause (i) of sub-section (1G) of section 206C will be reinstated for TCS on all categories of LRS payments made through all payment methods: Therefore, there won’t be any TCS for the first Rs 7 lakh remittance made through LRS. Beyond this Rs 7 Lakh threshold, TCS will be as per below:

  • 0.5% (if remittance for education is financed by education loan)
  • 5% (in case of remittance for education/medical treatment)
  • 20% for others

The TCS will continue to apply at a rate of 5% for the first Rs 7 lakh per individual per annum when purchasing an international trip programme package under Clause (ii) of Subsection (1G); the 20% rate will only be applied for expenditures over this threshold.

The rise in TCS rates that was scheduled to take effect on July 1, 2023 will now do so on October 1, 2023, with the revision described. Prior rates (before revision by the Finance Act 2023) will continue to be in effect until September 30, 2023.

For detailed information and the rates, please visit the press release documents by the Finance department dated 28th June 2023.

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