What Are The Latest Regulations On Tcs On Foreign Remittances?

By Author: Shashank Bhaskar
Total Articles: 63
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As a parent, you want to provide the world to your child. You would give them everything they need to live a comfortable life. As they grow old, they may wish to pursue higher education abroad. You will support them in pursuing their dream, and with Education Loans, you can fully finance their education without any financial burden.
You can apply for an Education Loan with any leading bank. You need to meet the eligibility criteria and have your documents for Loans. Once the Education Loan is approved, you can remit the funds via online Remittance. It is simple and secure. According to the Liberalised Remittance Scheme, you can remit a maximum of $250,000 in a financial year overseas. Contact the RBI for approval if you need to exceed the threshold limit.
What is the latest TCS notice for Foreign Remittance?
When you make a Foreign Remittance, you must pay the Tax Collected at Source. It is typically a percentage of the Remittance amount. Many parents who send their children for higher education overseas by obtaining ...
... a Loan, feel burdened by high TCS rates. Considering this, the Indian Government announced TCS benefits on Foreign Remittances for educational purposes on June 30, 2023.
Foreign Remittances up to Rs. 7 lakh, which an Education Loan covers, will be taxed at 0.05%. Foreign Remittances exceeding the threshold limit will be taxed at 5%. Let us understand the TCS benefit on Foreign Remittance with an example.
Let us assume you apply for an Education Loan and remit Rs. 10 lakh for your child living overseas in a financial year. The Rs. 7 lakh from the Remittance amount will be taxed at 0.05%. The remaining amount, i.e., Rs. 3 lakh, will be taxed at 5%. This new tax regime will come into effect from October 1, 2023.
What other educational costs does TCS benefit apply to?
The Indian Government has detailed the applicability of TCS benefits on Foreign Remittance in S0305 and S1107 of the notice. This means:

SO305 covers educational costs incurred when the student is moving overseas. TCS benefit applies to Remittances to cover tuition fees, travel, and accommodation costs.
S1107 covers educational costs incurred when a student pursues a foreign university correspondence course from India.

Be mindful of these codes when claiming tax benefits. Otherwise, you will end up being subjected to a higher TSC rate.
What are the documents required to claim TCS benefits?
Keep the following documents handy to claim a lower TCS rate on educational-related foreign Remittances:

Education Loan’s sanction letter should be in the name of the student and the co-applicant, i.e., the parent.
LRS declaration stating the source of Remittance is an Education Loan.
Bank statements indicating disbursement of Education Loan amount.