Legal Information / Articles


- The Union Budget 2020 proposed a 5% TCS (Tax collected at Source) on remittances undertaken via the Liberalised Remittance Scheme (“LRS") above ?7 lakh. This new rule goes live from October 1st, 2020.

- Starting on 01.10.2020, authorised dealers, will collect 5% tax at source once LRS remittance(s) made by an individual crosses 7 lakh in a financial year. 

- Tax paid should not be confused as an additional cost or tax on the fund transfer. The TCS will be reflected as tax credit in Form 26AS. So, the amount of TCS can be claimed as credit against tax payable while filing income tax returns. 

- The 5% is deducted only on the amount above 7 lakhs. For example, if you remit Rs10 Lakh in a year, 5% will be calculated on 3 lakh i.e. ?15,000 will be deducted as TCS.

- Any remittances made post March 2020 will count towards the 7 lakh threshold. For example, if you have transferred ?6 lakh before October and you transfer additional ?5 lakh after October 2020, then the 5% TCS will be calculated on IRs 11 lakh - ?7 lakh = ?4 lakh. So, 5% of 4 lakh which is ?20K will be debited as TCS.

- Note that no backdated TCS will need to be paid. So, in case remittances made more than INR 7 lakhs before October 2020, no TCS is payable.

- Further, ii case of short-term equity shares or the units, capital gains shall be computed but as per section 111A, such capital gains shall be taxed @ 15%.