In the context of Foreign Remittance Transactions (Know about Liberalised Remittance scheme), this kind of tax can be collected when money is sent abroad. Sending money doesn’t just mean sending it to someone. It could even imply touring abroad, shopping, investing abroad, purchasing assets, etc.

The Finance ministry of India has recently issued a new circular regarding changes relating to Tax Collection at Source (TCS) on Liberalised Remittance Scheme (LRS) and on the purchase of overseas trip deals.

All overseas outward remittances (bank account transfer, foreign exchange, loading forex card), except for medical and educational purposes, made via LRS will attract TCS at 20 per cent if the amount is above Rs 7 lakh in a financial year.

The higher rates of TCS will now be applicable from October 1, 2023 which were earlier coming into effect from July 1, 2023.

Under LRS, there will be no TCS on foreign remittances below Rs 7 lakh spend for educational expenses. If remittances above Rs 7 lakh spent for foreign education are a loan obtained from any approved financial institution, it will attract TCS at 0.5 per cent. Remittances beyond Rs 7 lakh spent on educational purposes not obtained through a loan, will attract a TCS of 5 per cent. 

Any outward remittance for medical treatment will attract TCS at 5 per cent if the threshold crosses Rs 7 lakh.

For overseas tour package, a TCS of 5 per cent will be levied if the amount is up to Rs 7 Lakh. Beyond this limit a TCS of 20 per cent will be levied from October 1, 2023.

On May 19, 2023, the finance ministry said a TCS of 20 per cent will be levied on individual payments of above Rs 7 lakh through international debit and credit cards from July 1, 2023. However, the ministry has not yet decided whether to keep credit card payments in the domain of LRS.