Tax Collected at Source (TCS) on Liberalized Remittance Scheme (LRS)

The Finance Act 2023 amended Section 206C of the Income Tax Act 1961 and introduced tax collection at source (TCS) on foreign remittance under LRS subject to the applicable threshold limit. A TCS at the rate of 20% shall be collected on foreign remittances under LRS exceeding ₹7 lakh during the financial year. A TCS at the rate of 0.50% shall be collected on foreign remittance under LRS if the amount being remitted is towards education abroad and is out of a loan obtained from any financial institution in India as defined under Section 80E of the Income Tax Act. The said amended income tax provisions shall be applicable from 1 October 2023.

Yes, TCS collection on LRS transactions is a regulatory requirement. This is amended under section 206C of the Income Tax Act 1961.

TCS is applicable on all foreign remittance transactions that fall under LRS.

If the purpose of transfer is under LRS (loan or gift to NRI), TCS will be applicable on transfers from a domestic account to an NRO account.

TCS paid can be adjusted against tax payable when individuals who would have paid TCS file their income tax returns (ITR) in India. Please consult your tax advisor/consultant for further information.

TCS is applicable on all LRS transactions. LRS permits Rupee loans and gifts to a NRI/PIO close relative. TCS is also applicable on Dynamic Currency Conversion (DCC) transactions on debit cards.

TCS is applicable at PAN level. The LRS limit maintenance, TCS charging and TCS reporting is consolidated at customer level i.e at PAN level.

Yes, a TCS at the rate of 20% will be applicable on all overseas transactions done through debit card, including transactions done on foreign merchants or sites which offer Dynamic Currency Conversion (DCC) transactions.

For all international transactions (POS/e-commerce/cash withdrawal) carried out using a debit card (except on the transactions through debit cards issued to NRE accounts), an upfront 20% of the total transaction amount along with applicable markup fees will be debited from the account irrespective of the purpose or type of transaction, and the collected 20% TCS amount will be reversed within 5 working days if the particular PAN has not crossed the threshold of ₹7 lakh for the financial year.

TCS will be collected on every foreign transaction on your debit card. A transaction equivalent to ₹100 will be processed if funds comprising the transaction amount (₹100), 3% mark-up fees on the transaction amount (₹3) and TCS at the rate of 20% (₹20), that is, total ₹123 ,are available at the time of processing. If the funds available are less than ₹123, the transaction will be declined.

If the transaction amount is within the regulatory limit of ₹7 lakh during the financial year, the TCS amount will be reversed within 5 working days from the date of transaction.

The TCS will not be reversed once debited. TCS will be reported to the tax authority and reflect in the 26AS of the individual. The remitter can approach the tax authority for refund through ITR or consult with tax advisor for refund/adjustment.

TCS amount will be refunded to the account from which TCS has been debited.

Some foreign merchants offer the facility of Dynamic Currency Conversion — which allows customers to make payments for the purchase directly in their home currency (i.e. Indian Rupees for cards issued in India). This service is offered by select foreign merchants or websites. The final transaction amount (as determined by the merchant/DCC service provider) is to be confirmed by you before making the payment. Depending on the amount provided by the merchant, Karnataka Bank will bill you the final amount (in Indian Rupees). The process of conversion, the exchange rates and any markup applied in such cases is determined by the relevant merchant or DCC service provider. If you do not opt for DCC then you will be billed by the merchant in the local currency. If the local currency is not US Dollars (USD), then the transaction is first converted from local currency to USD, and then from USD to Indian Rupees. The exchange rate will be prescribed by the associations (RuPay/Visa). In this scenario, the foreign currency markup to be charged by Karnataka Bank will be applicable.