Save on 20% TCS: Debit Card Tips for Foreign Transactions (2024)

FAQs

How to avoid paying 20% TCS? ›

In case you are sending money abroad to cover educational expenses, there is an exemption from TCS up to a maximum of Rs.7 lakh. For transactions above this threshold, TCS charges of 0.5% will be applicable if the funds are being provided via a loan.

Impact of 20% TCS

This means that foreign currency transactions made using an international credit card within the limit of USD 2,50,000 will be subject to a hefty TCS of 20%. The Government has responded to feedback and provided some relief. The 20% TCS will now only apply to expenses incurred above Rs 7 Lakhs.

TCS on debit cards

Once an individual's cumulative foreign currency expenses reach or exceed the threshold of INR 7 lakh within a single financial year, the TCS at the rate of 20% becomes applicable to the amounts exceeding this threshold.

Avoid Packaging of the trip

Separate bookings and payments can help avoid this TCS. For example, if you purchase your overseas flight tickets, hotels, and other costs separately, you won't pay any TCS as long as the company selling such tickets stays with you while you are in India.

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.

Tax Collected at Source applies when remitting money abroad. The remitting entity deducts this Income Tax before transferring the funds overseas. Starting October 1, 2023, any personal remittances above 7 lakh rupees annually will incur a 20% TCS rate on the amount exceeding this threshold.

Declare the TCS in your ITR in Schedule TCS. You can claim the TCS as a tax credit and set it off against your total tax liability. The e-portal algorithm computes your income and determines your tax liability. If eligible, you will receive a TCS refund in your bank account after your income tax return is finalised.

These fees can be avoided by choosing a bank account that doesn't charge fees and reimburses out-of-network ATM fees and by always withdrawing local currency from ATMs. Account holders can also ask their home bank if there are partner branches or in-network ATMs in the destination country or countries.

Is there tax on international debit card transactions? ›

What changed? Before July 1st, 2023, a 5% tax collected at source (TCS) applied to international credit card transactions exceeding a certain limit. Now, the TCS rate has jumped to a significant 20% for most transactions.

Enjoy the convenience of cashless shopping with SBI Global International Contactless Debit Card and earn SBI Rewardz points on your purchases. You can use it to purchase goods at merchant establishments, for making payment online and withdraw cash in India as well as across the globe.

There's a limit of USD 250,000 per year for international spending using credit cards. However, the 20% TCS doesn't apply to your entire spending. The government listened to concerns and provided some relief. You will only be charged the 20% TCS on expenses exceeding Rs 7 lakh (approximately $9,000) annually.

If the person fails to file the TCS return on or before the due date prescribed in the income tax law, a fee of Rs.200 per day must be paid, during which the failure continues. However, the amount of late fees shall not exceed the amount of TCS. One should deposit the late filing fees before filing the TCS return.

TCS Exemptions

TCS is exempted in the following cases: Goods used for personal consumption. Purchases for manufacturing, processing, or production, not for trading.

In case the tax collector who is accountable for collecting the tax and depositing it to the government fails to collect the tax or, after collecting, does not pay it to the government within the stipulated due dates, then he/she will be liable to pay interest of 1% per month or a part of the month.