Thread by @manansmehta5

Tax on foreign remittances: Let the buyer beware?

Starting 1 October 2020, TCS at 5% is collected by AD Banks on remittances under the Liberalized Remittance Scheme (LRS).

A THREAD

A little background on the LRS scheme:

Currently the bank allows remittance of all permissible Current/ Capital account transactions upto USD 2,50,000/- per FY (April- March) per Resident Individual without RBI permission.

Why the extra tax?

Revenue secretary Ajay Bhushan Pandey explaining the rationale had said, “we have data that shows many persons who transferred funds abroad under this scheme did not file income tax returns. Normally people remitting big amounts should be in the income tax..

bracket and paying income taxes. Therefore, we have to have this move. And, contrary to misinterpretation in a certain section of the media, 5% TCS on foreign remittance is not an additional or new tax. It is like TDS which you can adjust against your total income tax liability.”

So how does this work?

I make periodic payments for purchase of stock options/ RSUs with my US company. Does this apply to me? 💰

Yes. The remittances being made by you were under the LRS scheme

Your Bank will collect an additional 5% on the value of the remittance. Note that this amount can be adjusted against your final tax liability while filing your ITR.

Eventually, we might see some clarification issued on this - since Company's tend to already deduct TDS on this amount. Seems like a double whammy at this point of time.

I invest in US Stocks through Vested/ IndWealth/ ICICIDirect or similar platforms. What do i need to do? 💰

The remittances being made by you were under the LRS scheme. Your Bank will collect an additional 5% on the value of the remittance.

Note that this amount can be adjusted against your final tax liability while filing your ITR.

We wrote a detailed article on how tax works on US Stocks. That might also help.

thegalacticadvisors.com/post/investing…

What's with this TCS on "Overseas tour program package"? 💰

If you purchase tickets, hotel accommodation, etc directly through Indian entities 🏨

No TCS on this

If you purchase tickets, hotel accommodation, etc directly by remitting money abroad 🏨

Bank will collect TCS at 5% (assuming amount exceeds INR 7,00,000)

If you purchase a foreign tour package 🏨

The tour company will collect TCS at 5% (irrespective of amount remitted)

How does this impact NRIs? Can I still remit money from my NRO/ NRE account? 💰

This has zero impact on NRIs. NRE accounts are freely repatriable and do not fall under the LRS scheme.

For remittances from NRO accounts, there's a separate USD 1 million scheme and you can follow the process for repatriation of funds.

thegalacticadvisors.com/repatriation-o…

I am an NRI but my family sends my money from India from their resident accounts. Any impact here? 💰

Yes. In this case, 5% TCS will apply on remittances exceeding INR 7 lakh

What if I make 10 remittances of INR 6,50,000 each? Will TCS still be attracted? 💰

The limit of INR 7,00,000 is per year, You'll cross the limit in your second remittance and banks will start collecting TCS.

What if I remit only INR 7,50,000 in a year. How much TCS will be collected? 💰

TCS will be collected on amounts exceeding INR 7,00,000. In this case, TCS will be 5% of INR 50,000 i.e. INR 2,500.

Why do I pay the Government tax on my tax paid money? I don't want to pay an additional 5%. 💰

Remember that this is TCS. You can claim credit for this while filing your ITR. It's not an additional tax.

Fin.

#tax #finance #incometaxindia

Full article here:

thegalacticadvisors.com/post/tax-on-fo…