How to Avoid TCS on Foreign Remittance?

Wondering

how to avoid TCS on foreign remittance

. Tax Collection at Source (TCS) is applicable in India on foreign remittances under certain conditions.

How to Save TCS on Foreign Remittance?

Here are ways to potentially avoid or minimize TCS on foreign remittance:

• Threshold Limit: TCS is applicable if the amount of foreign remittance exceeds INR 7 lakhs in a financial year under the Liberalized Remittance Scheme (LRS) of the Reserve Bank of India (RBI). Transactions below this threshold generally do not attract TCS.

• Multiple Transactions: If your remittance amount is close to the threshold, consider splitting it into multiple transactions across different financial years to stay below the TCS threshold.

• Tax Residency: Non-resident Indians (NRIs) and residents eligible for tax exemptions or deductions under Double Taxation Avoidance Agreements (DTAA) may apply for relief to reduce or eliminate TCS.

• Tax Credit: If TCS is deducted, NRIs can claim a credit for the TCS amount against their Indian income tax liability, potentially reducing their overall tax burden.

• Investments: Instead of remitting funds directly, consider investing through permissible financial instruments like Foreign Currency Non-Repatriable (FCNR) deposits or Non-Resident External (NRE) accounts, which may not attract TCS.

• Expert Advice: Seek guidance from tax professionals or financial advisors specializing in international tax laws and regulations. They can provide personalized strategies to minimize TCS impact based on your specific situation.

• Regulatory Updates: Keep updated with changes in tax laws and RBI guidelines regarding foreign remittances to plan your transactions effectively.

I hope these points assist you in understanding how can we avoid TCS on foreign remittance.

While TCS on foreign remittance is a regulatory requirement in India, individuals can strategically plan their transactions to stay within exempted limits or utilize available credits and deductions.

Understanding the thresholds, leveraging tax treaties, and seeking professional advice can help minimize the impact of TCS on your financial transactions. This is how to avoid TCS on foreign remittance.

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You can consider the below strategies for

how to save TCS on foreign remittance

.

Provide your Permanent Account Number (PAN) or Aadhaar while making the foreign remittance. Form 15CA and Form 15CB are also required for foreign remittances.

To clear your confusion, Form 15CB is a certificate issued by a Chartered Accountant, and Form 15CA is a declaration made by the remitter. These forms help in determining the nature of the remittance and whether it attracts TCS.

If you are eligible for a lower or nil TDS rate under Section 206AA of the Income Tax Act, you have to pay low TCS on Foreign Remittance.

If your foreign remittance is within the limits specified (Rs 7 lakhs) under the Liberalized Remittance Scheme of the Reserve Bank of India, you can avoid TCS.

Check if your foreign remittance falls under any exemptions specified in the Income Tax Act.

• There is 0.5% TCS on foreign remittance for education.

• There is 5% TCS on foreign remittance.

•  

  There is 10% TCS on for not providing PAN Number.

Consult with your Chartered Accountant to understand the specific implications of your foreign remittance. This is

how can we avoid TCS on foreign remittance

.

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TCS or Tax Collected at Source is a tax that is collected from the buyer by the seller of a particular kind of goods and services. Now, if you ask me in terms of foreign remittance, TCS is the type of income tax that is collected for foreign transactions. When you send money abroad, TCS is collected. Now How to Avoid TCS on Foreign Remittance? Let me tell you that.

A foreign transaction does not only mean sending money abroad. It may also mean shopping abroad, touring, investing or purchasing assets abroad. There is a scheme called the Liberalised Remittance Scheme (LRS) that can be a boon for international transactions.

If you wish to avoid TCS on foreign remittance then you can do that by adjusting the amount that is deducted by the banks as Tax Collected at Source (TCS).

You may claim it as an income tax refund. In another way, while filing ITR or when calculating your advance taxes, you can also avail of your credit.

Follow the given steps to know how to avoid TCS on foreign remittances.

Step 1: The first step is to add your investment amount from your bank account.

Step 2: On the investment value, the bank will collect TCS.

Step 3: Through such an amount, you can make investments in US stocks.

Step 4: The collected TCS will be deposited by the bank to the Income Tax Department of India. This TCS that is collected will reflect in the Form 26AS quarterly. You can then check Form 26AS through the Income Tax portal by logging in with your credentials.

Step 5: While filing ITR the collected TCS will be reflected on its own as TCS paid to the Income Tax Department. This TCS can thus be adjusted with Income Tax payable.

Many of us send money abroad to our children or relatives for education, medical care, business, training, and other activities, as a part of the RBI's Liberalized Remittance Scheme (LRS). My uncle is one of them and since he stays alone, I help him out with all the procedures. I try to stay updated regarding this scheme and recently I came to know that the Finance Minister included a new provision in the Annual Budget which states that TCS will be applied to any foreign remittance that exceeds the limit specified by the LRS. This provision was enacted with the intention of keeping tabs on remittances and linking them to the income tax returns of the recipients. So, I think I can help you understand how to avoid TCS on foreign remittance.

The process to avoid TCS on foreign remittance

TCS can be used in the following circumstances:

• In the event that an approved seller gets an amount of more than INR 7,00,000 in a financial year from a purchaser who is transmitting the sum outside India under the LRS, then, at that point, the seller is expected to gather TCS in overabundance of INR 7,00,000.

• The seller is required to collect TCS on the entire amount received from the buyer when selling an overseas tour program package, regardless of any limit.

Rate of TCS on Foreign Remittance

• TCS must be gathered by the merchant or approved seller at the rate of 5%.

• The TCS rate will be 0.5% instead of 5% if a financial institution takes out an educational loan to pay for the amount.

When to collect TCS on Foreign Remittance?

The TCS should be collected either at

• the receipt of settlement sum by any mode from the purchaser or

• at the hour of charging the sum payable by the purchaser, whichever is prior.

If TCS has been collected by the seller on foreign remittance or on the sale of the overseas tour package, the seller must submit a return on Form 27EQ. Additionally, the seller can issue a tax-collected certificate to the buyer on Form 27D.

This is how to avoid TCS on foreign remittance.

There are many people who send cash or goods to their families from foreign countries. These goods or amounts of money from the migrants or employees are known as remittances. Now there is a tax levied on them as well. Many people do not know how to avoid TCS on foreign remittances, so let me tell you that there is no TCS or Tax Collection at Source below Rs 7 lakh. Bank or the authorised dealer must collect TCS at the rate of 5% only when the goods or money go above Rs 7 lakhs.

How can we avoid TCS on foreign remittance?

I myself tried to find the answer to this query and learned that this TCS can be claimed as an Income Tax refund. You can also get credit while filing your income tax return or computing your advance taxes. The bank provides a TCS certificate at the time of deduction, so keep it safe and use its details when claiming TCS during the ITR filing. 

Do note that, as per Section 206c(1G), TCS is not charged on money remitted by the NRIs from their NRO account to NRE or other foreign accounts. 

The rates of Foreign Remittance are-

• 5% TCS for foreign remittance 

• 0.5% TCS on foreign remittance for education

• 10% TCS will be levied for not furnishing PAN number

I hope you have understood how to avoid TCS on foreign remittance.