Income Tax Slabs 2024-25 Budget 2024 Live Updates: New income tax regime tweaks, standard deduction hike and income tax relief on the cards? – The Times of India

Income Tax Budget 2024 Live: Why new TCS rules for LRS transactions need to be changed

“The Tax Collected at Source (TCS) rules on certain transactions under the Liberalised Remittance Scheme (LRS) have been a topic of debate since it got introduced in the year 2020. Under the current rules, TCS at the rate of 20% is applicable on remittances exceeding Rs 7 Lakhs per annum excluding remittances for education and medical treatment.

Lower TCS Rates of 0.5% and 5% are also available for certain transactions.

This tax collected at the time of remittance of funds creates tax liquidity challenges for individuals while sending money abroad. Concept of TCS under the Income tax regime was introduced to track certain transactions and to ensure tax compliance later on.

However, in the case of LRS, 20% of funds at the time of remittance gets blocked creating liquidity challenges for individuals, especially for those who rely on regular remittances for personal.

For Instance, a salaried employee who has already paid taxes on his salary income if remitting the same for maintenance of family abroad ends up paying TCS @20%. Given TDS is already deducted on such income, he has no option than to claim TCS as refund in his tax return which unnecessary creates cash flow challenges for such an individual.

Similarly, on the purchase of an overseas tour package as well, TCS is collected at a rate of 20% for transactions exceeding Rs 7 Lakhs and at the rate of 5% for transactions below the limit. If the intent of these provisions is to track such transactions, the applicable tax rates are expected to be reduced as they are creating multiple practical challenges for individuals,” says Preeti Sharma, Partner, Tax & Regulatory Services, BDO India LLP.