Primary impact only on investment in assets such as real estate, bonds, stocks outside India by HNI and tour travel packages or gifts to non-residents, says Ministry of Finance
Primary impact only on investment in assets such as real estate, bonds, stocks outside India by HNI and tour travel packages or gifts to non-residents, says Ministry of FinanceAmid social media outburst over hike in TCS (Tax Collected at Source) rates to 20% from 5% from July 1, the Ministry of Finance on Thursday issued FAQs on the matter.
Spending in foreign exchange through international credit cards will be covered under the RBI's liberalised remittance scheme (LRS), under which a resident can remit money abroad up to a maximum of $2.5 lakh per annum without the authorisation of the Reserve Bank, as per a Finance Ministry notification. Not only foreign packages, the 20% TCS rule will also apply to credit cards on international transactions.
FinMin explained the reasons for the increase in TCS:
- The payment of TCS is not a final tax
- If the TCS payee is a taxpayer, he can claim credit for the TCS as his tax payment against regular income and adjust it against the advance tax etc., payments accordingly.
- If the TCS is of a person not being a taxpayer, then the 20% rate on such presumed income is not high. The tax rate slab of 20% starts in the new regime for incomes over Rs 12 lakh and is 30% for incomes over Rs 15 lakh.
- Instances have come to notice where the LRS payments are disproportionately high when compared to the disclosed incomes.
- No changes in medical or Education expenses- Position stays as it was before the Finance Act 2023.
- Primary impact only on investment in assets such as real estate, bonds, stocks outside India by HNI and tour travel packages or gifts to non-residents.
- Those individuals remitting from their own funds are normally expected to be higher-income taxpayers, and for those remitting through institutional loans for education, a concessional rate of 0.5% is provided.
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