From October 1, 5% tax on foreign fund transfer
While the tax on foreign tour packages will be 5% for any amount, for other foreign remittances, the tax will kick in only for the amount spent above ₹7 lakh.Updated: Sep 10, 2020, 12:50 IST
Any amount sent abroad to buy foreign tour packages, and every other foreign remittance made above ₹7 lakh, will attract a tax-collected-at source (TCS) beginning 1 October unless you are making the remittance from income that is already tax-deducted at source (TDS). .
While the tax on foreign tour packages will be 5% for any amount, for other foreign remittances, the tax will kick in only for the amount spent above ₹7 lakh.
For education-related foreign remittances funded by loans, though, the tax will be just 0.5% for the amount above ₹7 lakh, considering many Indian students take loans to pursue education abroad.
Under the Reserve Bank of India’s liberalized remittances scheme, individuals can remit a maximum of $250,000 abroad every year. The provision to collect tax on remittances was introduced in the Finance Act of 2020 subject to riders and notified on 27 March to take effect from 1 October.
Many financial institutions have communicated the applicability of tax-collected-at source on remittances from October to customers.
The Union finance ministry has been extending the scope of both tax-deducted at source and tax-collected-at source, and encouraging electronic payments in order to have a better idea of transactions in the Indian economy and to be able to match the spending pattern of assessees with their reported taxable income.