Taxman to sniff around foreign remittances above ₹6 lakh

If you are remitting over ₹6 lakh overseas, then it is likely to come under the purview of income tax. The Central Board of Direct Taxes (CBDT) has reportedly commenced an investigation into foreign remittances above ₹6 lakh.

The apex body is reportedly cracking down on foreign remittances to spot the discrepancies between what the taxpayers reveal and the actual data shows. This brings into focus the rate of higher TCS (tax collected at source) imposed on high-value remittances from last year.

Higher TCS 

The Finance Ministry made changes to TCS starting Oct 1, 2023 to impose 20 percent tax rate on remittances above ₹7 lakh.

The TCS rate was 5 percent earlier. It had initially planned a TCS on spending via credit cards. However, after the popular backlash, the government excluded payments via credit cards from LRS limits, thus sparing the higher rate of TCS.

The Finance Ministry had also exempted certain categories of expenses from higher tax rates such as medical expenses and education.

Under the RBI’s Liberalised Remittance Scheme (LRS), all resident individuals are allowed to freely remit up to $2,50,000 in one financial year for any permissible current or capital account transaction or a combination of both.

The TCS is an additional tax imposed by the seller over and above the selling price of a specific product or service. This is collected at the time of sale and then deposited to the tax authorities.

However, the TCS paid can be adjusted against the individual's tax liability at the time of filing an income tax return. So, if the total tax liability turns out to be lower than TCS, the taxpayer will stand to get a tax refund.

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