Interim Budget seals India's plan for higher taxes on your foreign holidays
The Interim Budget 2024 includes the inclusion of increased Tax Collected at Source (TCS) rates on foreign remittances into the Income Tax Act as an amendment. The adjustment is awaiting parliamentary approval and will affect foreign expenditures ...
By ET Online | Updated:
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The Interim Budget 2024 has paved the way for the formal inclusion of the increased Tax Collected at Source (TCS) rates on foreign remittances, as previously announced in the 2023 Budget, into the Income Tax Act. The adjustment is set to come into effect following the parliamentary approval of the corresponding amendment.
Finance Minister Nirmala Sitharaman, in her last Budget, had proposed a hike in the TCS rate on foreign remittances under the Liberalised Remittance Scheme (LRS) and on bookings for foreign tour packages, hiking it from 5 per cent to 20 per cent for foreign expenditures exceeding Rs 7 lakh annually per individual.
Originally slated for implementation on July 1, 2023, it was deferred and enforced on October 1, 2023.
Currently, the majority of foreign remittances and expenditures through various payment modes, such as debit cards, forex cards, or others, are subject to a 20 per cent TCS when surpassing the Rs 7 lakh per person per financial year threshold. Credit card transactions remain exempt from this provision. This aggregate limit applies universally to all remittances by an individual, regardless of the chosen payment method.
After Sitharaman's Budget 2023 announcement, international expenditures using credit cards were brought within the ambit of LRS in May, falling under the TCS ambit for the first time. However, in June 2023, the government rescinded its May circular, excluding international credit card spends once again from TCS obligations.
The progression in the Interim Budget marks a critical step towards the formal integration of the revised TCS rates on foreign remittances into the legal framework, with the impending parliamentary approval determining the timeline for its implementation.
Finance Minister Nirmala Sitharaman, in her last Budget, had proposed a hike in the TCS rate on foreign remittances under the Liberalised Remittance Scheme (LRS) and on bookings for foreign tour packages, hiking it from 5 per cent to 20 per cent for foreign expenditures exceeding Rs 7 lakh annually per individual.
Originally slated for implementation on July 1, 2023, it was deferred and enforced on October 1, 2023.
Currently, the majority of foreign remittances and expenditures through various payment modes, such as debit cards, forex cards, or others, are subject to a 20 per cent TCS when surpassing the Rs 7 lakh per person per financial year threshold. Credit card transactions remain exempt from this provision. This aggregate limit applies universally to all remittances by an individual, regardless of the chosen payment method.
After Sitharaman's Budget 2023 announcement, international expenditures using credit cards were brought within the ambit of LRS in May, falling under the TCS ambit for the first time. However, in June 2023, the government rescinded its May circular, excluding international credit card spends once again from TCS obligations.
The progression in the Interim Budget marks a critical step towards the formal integration of the revised TCS rates on foreign remittances into the legal framework, with the impending parliamentary approval determining the timeline for its implementation.
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