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<ul><li>For education and medical treatment there is no change to the earlier tax of 5% on remittances in excess of ₹7 lakh</li></ul><ul><li>Overseas tour packages will get more expensive as <keyword id="6357150" type="General" weightage="100" keywordseo="tcs" source="Orion">TCS</keyword> has been increased from 5% to 20%</li></ul><ul><li>TCS paid can be settled against tax dues and refund claimed if applicable</li></ul>The Union Budget 2023 has proposed a tax collection at source (TCS) of 20% for foreign outward remittance under liberalized remittance scheme (LRS) (other than for education and medical purposes). This will be applicable from July 1, 2023. Before this, TCS of 5% was applicable to foreign outward remittance in excess of ₹7 lakh. Now, apart from education and medical treatment, there will be no threshold limit for other instances of remittances. “ There is a proposal to increase the TCS to 20% from 5% for exchange remittances under LRS as prescribed by RBI. The TCS can be claimed as a credit in the tax return. This impacts the remittances being made under LRS, such as investing in foreign stocks, property overseas travel, maintenance of relatives abroad,” says <keyword id="8998975" type="General" weightage="50" keywordseo="rohinton-sidhwa" source="Orion">Rohinton Sidhwa</keyword>, partner, Deloitte India. Let us take a closer look at how this will affect overseas remittance under LRS. Overseas education and medical treatment: For both overseas education and medical treatment, the 5% TCS is charged on the total amount of remittance in excess of ₹7 lakh. The budget proposes no change in that. Plus, when someone takes a loan to study abroad the TCS is charged only at 0.5% of the total amount in excess of ₹7 lakh. It is to be noted that education includes tuition fees and hostel expenses. “In case a student goes abroad and lives in a school/college hostel and remittance for foreign exchange is made for the same, then it can be considered as remittance for educational purposes. However, in case the student spends for food/lodging and where there is no link of such spending with the school/college, then it may be sought to be classified as other than education purposes and the field officers may seek to demand a levy of TCS at 20%. In case this happens, then education abroad would become quite cash intensive,” says <keyword id="1256264" type="General" weightage="50" keywordseo="vivek-jalan" source="Orion">Vivek Jalan</keyword>, Partner, Tax Connect Advisory. Overseas tour packages: Overseas tour packages will get costlier and attract a TCS of 20% without any threshold limit. If an Europe tour package costs ₹10 lakh, one now has to pay ₹12 lakh for the same package going ahead. “However, this is applicable only to your packages and will not apply if someone is making bookings of hotels etc on their own,” says Rachit Sharma, Company Secretary, Taxmann Group. “While various boosters have been provided for integrated domestic travel in this budget, yet this increase in the rate of TCS would act as a dampener for foreign travel. Hence the policy of The Government seems clear,” says Jalan. Overseas investments: When investing abroad, one has to pay 20% TCS without any threshold limit going forward. Over the last few years more and more Indians have been investing overseas, especially in the US. Since every dollar one invests will now have a 20% tax imposed on it, this will affect their returns (earlier one did not have to pay any TCS on up to ₹7 lakh invested). Buying property abroad: “Similarly, if the person wants to buy an immovable property outside India, in addition to the money he has to pay for the purchase of the property, he will be required to pay 20% of the the purchase price by the way of TCS to the bank from where remittance is made,” says <keyword id="47558" type="General" weightage="50" keywordseo="ved-jain" source="Orion">Ved Jain</keyword>, founder, Ved Jain Associates. Hence, if you are buying a property in Dubai worth Rs 3 crore, an additional ₹60 lakh needs to be paid. However, one can get a tax credit on the same as explained later. <div type="image" title="budget-table" msid="97555446" hostid="261" sizebytes="76684" caption="&amp;lt;p&amp;gt;&amp;lt;em&amp;gt;Source: Taxmann Group, Only for remittance under LRS&amp;lt;/em&amp;gt;&amp;lt;/p&amp;gt;"></div> TCS can be settled against tax dues: TCS on remittances essentially means that a person making a remittance will have to pay an additional 20% at the time of making the remittance, i.e. there will be an additional 20% cash flow paid towards TCS. However, it can be settled against tax dues. “This amount then will appear in their Form 26AS since TCS is linked to their PAN and can be settled against their tax dues. This is tax already collected from them. In the event the taxpayer has a refund situation, the excess tax collected via TCS shall be refunded to the taxpayer,” says Archit Gupta, founder and CEO, Clear. “However for everyone this implies more funds locked in which are only adjustable while paying taxes, or refunded after the FY once income tax return is processed,” says <keyword id="3707077" type="General" weightage="50" keywordseo="sidhwa" source="Orion">Sidhwa</keyword>. One may infer that this move is aimed at discouraging people from sending money abroad. When sending money abroad, one thus needs to plan accordingly.

Budget 2023 proposes 20% TCS on foreign expenses under LRS

Gross <keyword id="45697" type="General" weightage="20" keywordseo="direct-tax" source="Orion">direct tax</keyword> collections stood at Rs 6.48 lakh crore till September 8, which is 35.46 per cent higher than the gross collections for the corresponding period of last year. In the year-ago period, direct <keyword id="487578" type="General" weightage="20" keywordseo="tax-collections" source="Orion">tax collections</keyword> stood at Rs 5.29 lakh crore, which was 30.17 per cent higher than the net collections for the corresponding period of the previous year. The present collections are 37.24 per cent of the total budget estimates for 2022-23, an official statement by the Finance Ministry said. Refunds amounting to Rs 1.19 lakh crore have also been issued between April 1, 2022 and September 8, 2022, which is 65.29 per cent higher than the refunds issued during the same period of last year. "As the economy continues to recover from the Covid downturn, the efforts at nudging tax-payers to better compliance through a combination of technology intervention and data reporting are paying off, and tax collections continue on their upward trajectory. It's expected that a clearer picture will be available by the calendar year-end as filings come in for corporate tax returns," said Rohinton Sidhwa, Partner, Deloitte India. "The increase in direct taxe collections is encouraging and indicative of the robust economic growth. The growth rate of corporate <keyword id="6354751" type="General" weightage="20" keywordseo="income-tax" source="Orion">income tax</keyword> indicates buoyancy in the profitability of India Inc," said Amit Singhania, Partner, Shardul Amarchand Mangaldas &amp; Co.

Direct tax collections surge 35% but fall short of estimates

New Delhi, Jul 4 () The income tax department has brought in changes to the challan for paying the equalisation levy by expanding its scope to include non-resident e-commerce players supplying goods or services online. Over two dozen non-resident tech companies would come under the purview of the equalisation levy which was introduced in Budget 2020-21 and has come into effect from April 1, 2020. Its first instalment is due on July 7. The 2 per cent tax would be levied on consideration received by such companies from e-commerce supply or services. The income tax department has modifies challan ITNS 285 (relating to payment of equalisation levy) to enable payment of the first installment by non-resident e-commerce operators. The amended challan now adds "e-commerce operator for e-commerce supply or services" under 'Type of Deductor'. The challan also seeks mandatory PAN of the deductor. Further, it provides for 'Outside India' option while seeking address details. Nangia Andersen LLP Partner Sandeep Jhunjhunwala said along with this modification in the payment challan, the Central Board of Direct Taxes (CBDT) has also cleared the clouds on requirement of PAN by making it a mandatory tab in the challan. "This has rather imposed a burdensome and challenging task for non-resident e-commerce players to apply for and obtain Permanent Account Number within one business day in the midst of curbs, lockdown and pandemic affected business life and also organize the mode of payment through an Indian bank account or debit card issued by an Indian bank," he said. Jhunjhunwala further said non-resident digital companies were waiting for a detailed FAQ to get clarity on abstruse issues surrounding the equalisation levy. "This rushed move could cause substantial challenges in discharging the nearing first payment liability of equalisation levy, in case interest and penalty for delayed payments are to be avoided," he added. Deloitte India Partner Rohinton Sidhwa said while there have been widespread demands for its deferral due to the pandemic, there are also several parts of the new provisions that require clarification. Under the new law, the first instalment is due on July 7 for the equalisation levy charged on supplies in the first quarter of the financial year ending June 30. "The modification of the challan is to facilitate this payment. Earlier this challan only allowed payment for the 6 per cent equalization levy applicable on advertising services that was imposed by Finance Act 2016. Detailed FAQ's and procedural rules are yet to be specified for the new levy," Sidhwa added. Shardul Amarchand Mangaldas &amp; Co Partner Amit Singhania said, "The changes in payment challan will now enable the payment of equalisation levy by foreign companies. However, the industry was expecting its deferral considering the lack of clarification on few issues." JD ABM ABM

I-T dept amends tax challan to include non-resident e-commerce suppliers for equalisation levy

New Delhi, May 14 () Tax deducted on payment of dividend, insurance policy, rent, professional fee and on the acquisition of immovable property has been cut by 25 per cent for a period up to March 31, the tax department has said.Following Finance Minister Nirmala Sitharaman's announcement of a reduction in the rate of tax deducted at source (TDS) and tax collected at source (TCS) for non-salaried payments, the Central Board of Direct Taxes (CBDT) notified revised rates that will be applicable from May 14, 2020, to March 31, 2021.Announcing a slew of measures to help companies and taxpayers tide over hardships caused by coronavirus lockdown, Sitharaman had on Wednesday stated that the reduction in TDS/TCS rate would release about Rs 50,000 crore in the hands of people.In the notification, the CBDT said while TCS on sale of the motor vehicle above Rs 10 lakh has been cut to 0.75 per cent from 1 per cent earlier, TDS on 23 items has been reduced.The CBDT said TDS on payment for life insurance policy has been reduced to 3.75 per cent from 5 per cent, while that on dividend and interest as well as rent for immovable property has been cut to 7.5 per cent from 10 per cent earlier.The 1 per cent TDS charged on payment made for the acquisition of immovable property has now been reduced to 0.75 per cent. Payment of rent by individual or HUF has been cut to 3.75 per cent from 5 per cent earlier.TDS on e-commerce participants has also been reduced to 0.75 per cent from 1 pr cent.Similarly, tax on professional fee has been reduced to 1.5 per cent from 2 per cent.TDS on payments in respect of deposits under National Savings Scheme has been reduced to 7.5 per cent from 10 per cent and that on payments for re-purchase of units by Mutual Funds to 15 per cent from 20 per cent.The same on insurance commission and brokerage have been cut to 3.75 per cent from 5 per cent.TDS on payment of dividend by mutual funds has been reduced to 7.5 per cent from 10 per cent.TCS on sale of tendu leaves, scrap, timber, forest produce, and minerals such as coal, lignite or iron ore has also been reduced.The CBDT said there shall be no reduction in rates of TDS or TCS where the tax is required to be deducted or collected at a higher rate due to the non-furnishing of PAN/Aadhaar.Nangia Andersen LLP Director Sandeep Jhunjhunwala said: "The reduction of TDS and TCS rates on non-salaried payments by 25 per cent will set free additional cash in the hands of the vendors, and help increase liquidity in the economy"."This relief could be enjoyed by all businesses and would play a pivotal role in increasing cash flows as the beneficial rates would be available until the end of the current financial year."Deloitte India Partner Rohinton Sidhwa said, "The TDS / TCS cut will release liquidity into the system. Most assessees would have deluged the tax department with applications for lower withholding in any case and this effectively will also reduce administrative burden".PwC India Partner (Tax and Regulatory) Vikram Doshi said, "The immediate reduction of TDS rate by 25 per cent is a direct and practical measure to increase liquidity in the system. While there was an expectation of a higher rate of reduction, the longer period of reduction till March 31, 2021, balances the slightly lower rate."The extension of due dates of various compliances provides additional relief given the practical difficulty in undertaking compliances." ANZ BALBAL

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Budget 2023 proposes 20% TCS on foreign expenses under LRS

Anagh Pal

Direct tax collections surge 35% but fall short of estimates

IANS

I-T dept amends tax challan to include non-resident e-commerce suppliers for equalisation levy

PTI

Tax on dividend, rent, insurance payment cut by 25%

PTI

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