Overview of TCS
In the Union Budget that Finance Minister Nirmala Sitharaman presented in February 2023, there were some changes related to finance. One key addition was the introduction of the New Tax Regime and another significant development was the implementation of Tax Collected at Source (TCS) for transactions. Section 206C of the Income Tax Act outlines which goods sellers must collect tax from buyers on. It’s worth noting that the increased TCS rate on remittances could make these transactions more expensive for individuals who send or receive money from abroad. As per the 2023 budget under the Liberalized Remittance Scheme (LRS), the TCS rate for remittances has risen from 5% to 20%. This higher rate will now apply to all transfers except those specifically meant for medical purposes. Here are a few examples:
- Foreign Tour Packages
- Providing Loans/Sending Gift Money To Relatives Living Abroad
- Buying Stocks Of Foreign Companies
- Purchasing Property Abroad
- Immigrants Remitting Funds To Their Foreign Bank Account
Eligibility For Claiming A Refund Of TCS
If someone has paid TCS (Tax collected at Source) on remittances, they can request a refund under the following conditions:
- If the total TCS amount is higher than the taxpayer’s tax liability for the year
- If the taxpayer files their ITR (Income Tax Return) on time
- If the taxpayer possesses supporting documents for remittances, such as bank statements and Forex card statements
Scenarios Where TCS Refund Can Be Claimed
- When an individual sends money overseas for medical purposes, they are required to pay a Tax Collected at Source (TCS) rate of 5%. If their actual tax liability for the year is more than 5%, they have the option to claim a refund for the excess TCS paid.
- If someone sends money abroad for reasons other than education or medical treatment, they need to pay a TCS rate of 20%. If their actual tax liability turns out to be more than 20%, they can request a refund for the additional TCS amount paid.
- In cases where an individual uses a travel card to send money but doesn’t utilize the entire loaded amount on the card, they can claim a refund for the TCS paid on the unused portion.
Also read: Exemptions From TCS – TCS on International Money Transfer
How Do I Claim Refunds Of TCS On Foreign Remittances?
To claim a refund for TCS (Tax Collected at Source) on remittances, follow these steps:
- Make sure to submit your Income Tax Return (ITR) before the deadline.
- Head to the ITR website. Locate the section dedicated to TDS (Tax Deducted at Source).
- Submit a request for a refund of TCS paid on remittances.
- Include a bank statement or Forex card statement that clearly shows the deduction of TCS.
- Provide any supporting documents related to the remittance.
- After filing your ITR for the financial year, the Income Tax Department will thoroughly approve your refund claim.
- Should you have any uncertainties or inquiries concerning your refund, it is advisable to seek guidance from a tax professional.
Please note that these steps are crucial in ensuring a process for obtaining your refund on TCS paid towards remittances.
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Our related blogs on TCS
The Road Ahead
The purpose of increasing the TCS rate is to generate tax revenue and stimulate spending. This will have an impact on the long-term growth of the Indian economy. It’s worth noting that claiming a refund for TCS on foreign remittances can be a time-consuming procedure. It requires attention to tax laws so it is advisable to consult a tax professional for guidance. Maintaining records and documentation of your remittances can significantly assist with the refund process. Being well-informed and proactive will increase your chances of claiming a refund. Remember, it’s crucial to take all measures to ensure compliance and explore refund options.
FAQs
Generally, the TCS debited from a transaction is not refundable after the funds have been sent. However, there may be instances where the funds might be returned unpaid. Under such circ*mstances, the banks can refund the TCS if the funds are returned on the same day as the remittance or transfer.
What is a tcs refund? ›
TCS is collected in addition to any GST on services. What makes TCS unique is that you may claim a refund of the amount when filing your ITR. For example, if the TCS paid in 2024 is more than your tax liability for the financial year, you can claim an appropriate refund.
How to avoid tcs on foreign remittance in NRI? ›
How to Avoid TCS on Foreign Remittances. For most popular transfer purposes, the only way to avoid TCS on foreign remittances is to limit your overseas fund transfers to up to INR 7,00,000 within a financial year.
How to avoid 20% tcs? ›
You don't have to pay TCS on money transferred overseas if the amount is below INR 7 lakh, so keep the transfer amount below INR 7 lakh to avoid 20% TCS On Foreign Remittances . Remember that to avoid paying TCS this way, the total amount you send in a financial year should be below INR 7 lakh.
Why did I get a TCS treas 449 tax refund? ›
If your client's refund is less than expected and you see a coinciding TCS TREAS 449 offset, this means that the tax payers refund has been reduced to repay a debt collected through the Treasury Offset Program. This program is designed to collect delinquent debts that are owed to states and federal agencies.
How much money can be transferred from India to the USA without tax? ›
The Union Budget 2023 brought positive changes but increased foreign remittance tax rates to 20%. Exemptions apply for educational and medical expenses. NRIs can transfer $1 million from India to the USA tax-free. No tax exemptions are allowed for money transfers from the USA to India.
What is the penalty for TCS return? ›
Penalty (Section 271H)
The Assessing Officer may direct a person who fails to file the TDS/TCS statement within the due date to pay a minimum penalty of INR 10,000, which may extend to INR1,00,000. Such penalty is in addition to the late filing fee under Section 234E.
How do I check my TCS refund? ›
Step 1: Go to the e-Filing portal homepage.
- Step 2: Enter the user ID and password.
- Step 3: Go to e-File tab > Income Tax Returns > View Filed Returns.
- Step 4: Now you can check the refund status for the desired Assessment year.
- Status 1: When refund is issued:
- Status 2: When refund is partially adjusted:
What is the new TCS rule in 2023? The TCS has now gone up to 20% from 5% for all remittances except those concerning education or medical treatment. Remittance is any money you send abroad. You'll still be taxed at 5% for amounts exceeding 7 lakhs for education and medical treatment in a foreign land.
How much money can NRI send to India? ›
Know the limits on transfers: While sending money to any country, one needs to be aware of remittance limits. There is no tab on the amount of money an NRI can send to India. However, the money being sent must be earned legally. Also, the sender needs to pay required taxes in the country where it has been earned.
The TCS rate on foreign remittances exceeding ₹7 lakhs is 20%. By limiting your total expenses or investments in foreign avenues to ₹7 lakhs, you can reduce or avoid the foreign remittance tax. Furthermore, transactions made through foreign credit cards and debit cards are also kept outside the purview of the LRS.
How much money can be sent abroad from India without tax? ›
Transfer money internationally as a resident Indian
Or do you frequently send funds to your family overseas? Under the prevailing Liberalised Remittance Scheme (LRS) regulations, you can remit funds overseas up to USD 250,000 per Financial Year (April-March).
Can we claim a TCS refund? ›
Claim TCS Refund: In your income tax return, you can claim a refund for the TCS paid. Provide the details of the TCS transaction, including the amount, the seller's PAN, and the TCS certificate details. 4. Calculate and Verify the Refund: Ensure that you've calculated the refund accurately.
How to transfer money from abroad to India without tax? ›
However, sending money to India from overseas will have tax implications for the recipient who is a resident of India. This will depend on the purpose of the remittance. If money is received for family maintenance or supporting family members (for education, medical care, etc.), then it is not taxable.
What is TCS 1% rule? ›
TCS Payments and Returns
TCS payments must be deposited using Challan 281 within 7 days from the end of the month in which the tax was collected. The tax collector must submit a quarterly TCS return using Form 27EQ. Any interest for late payment of TCS is charged at 1% per month or part thereof.
How to claim TCS refund in gst? ›
Steps Involved in Filing TDS and TCS Credit Received on GST Portal
- Step 1: Log in to the GST portal.
- Step 2: Go to 'Services' > 'Returns' > 'TDS and TCS Credit Received'
- Step 3: Select the return period and proceed to the 'TDS/TCS credit received' tile.
No, according to Section 206C(1H) of the Income Tax Act, you cannot collect TCS if a buyer is under the liability to pay TDS.
How to file TCS return? ›
Know how to file TDS or TCS returns online in three simple steps:
- Download the . csi file by visiting the e-filing portal. ...
- Generate an FVU file using any verification tool such as the recommended RPU Utility software. ...
- Finally, upload the FVU file on the e-filing portal under the File Income Tax menu.
If the actual tax payable is less than the TDS, you must file Income Tax Return (ITR) to claim TDS refund. While filing the ITR online, you need to provide the details of a bank account and IFSC code. The Income Tax (IT) department requires these details to give a TDS refund.
