Budget 2023-24: TCS on foreign remittance up to 20%

Travelling and remitting money abroad is likely to get more expensive. In a budget that greatly uplifted the middle class and poor sectors of India, a segment of people who will be adversely affected by the proposals are those sending money abroad. The Finance Minister announced an increase in Tax Collection at Source (TCS) on foreign remittances under the Liberalised Remittance Scheme (LRS) from the current 5% to a steep 20%.

However, the budget has clarified that the TCS on remittances to students studying abroad and those procuring treatment abroad remains constant at 5% as before. However, other investments, tours and gifts exceeding Rs7 lakhs in a year will be subjected to a higher TCS of 20% effective from July 1, 2023. It may be recollected that Indian residents can do maximum remittance of up to $250,000 per financial year out of India. 

Hypothetically, if someone wants to invest Rs100 in foreign stocks, they automatically come under the purview of 20% TCS, and will thus have to allocate Rs125 for the transfer rather than just Rs105.25 under the old regime. In the old regime, the 20% TCS was only valid if someone carried out high-value transactions without a PAN card for identification. To that extent, the new regime becomes a lot more complicated.

This augmentation traces its origins to the deceleration of the rupee value, and this move will help India control the relentless weakening of the Indian rupee. People will be more prudent when sending out money as there is not an audit trail and people have to file tax returns to get their TCS refunded. This in turn will enable more money to be held within the country during the financial year, and also aid the government in keeping better tabs on the tax returns filed.