How changes in taxation policy are affecting Indians living abroad from October 1
Under the revised rules, five per cent tax will be imposed on all remittances above Rs 7 lakh under the scheme. The rate of tax will increase to 10 per cent in absence of PAN or Aadhaar details.
The Union Budget this year introduced the provision for tax collected at source (TCS) under which the Indian government imposed a tax to be collected at source from individuals on remittances made through the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI).
Under the revised rules, five per cent tax will be imposed on all remittances above Rs 7 lakh under the scheme. The rate of tax will increase to 10 per cent in absence of PAN or Aadhaar details.
As per the initial order, the changes were supposed to come into effect from April 2020, but were delayed in view of the coronavirus pandemic.
The latest changes do not directly affect Non-Resident Indians (NRIs) or Persons of Indian Origin (PIOs) living outside the country. But people studying abroad, going on packaged tours or making an investment outside the country will have to shell out a little more money.
The changes came into effect from October 1 and here is how they have affected NRIs and PIOs:
After the revision in taxation policy, TCS is being deducted on remittances of Rs 7 lakh ($9,529) or more. It will be collected at source by the remitting banks. Amount below Rs 7 lakh will not be subjected to TCS.
Payments for foreign tour packages are also subjected to five per cent TCS. However, if a person is booking tickets, hotels on their own, they are not liable to the tax.
Under the LRS, Indian residents can remit up to $250,000 every year for medical treatment abroad, education, investment in stocks, real estate, or bonds. The same will be applied for remittance for relative maintenance outside the country.
The TCS will not apply to buyers of the foreign exchange who are already subject to Tax Deducted at Source (TDS) under the Income-Tax Act, 1961.
The collected tax paid under TCS can be claimed back, fully or partially, while filing for an income tax return, just like TDS. The person’s total income should be below the tax threshold limit for the year.
(With inputs from agencies)
