Unlocking the Treasure: Demystifying TCS Applicability on Foreign Remittance for Education

Yes, TCS (Tax Collected at Source) is applicable on foreign remittance for education.

Detailed answer question

Yes, Tax Collected at Source (TCS) is applicable on foreign remittance for education. When a person remits money abroad for educational purposes, the Indian Income Tax Act mandates the collection of TCS on the amount being remitted.

TCS is a form of tax that is collected by the remitter while making specified payments such as foreign remittances. The current rate of TCS applicable for foreign remittances for education is 0.5% of the remitted amount. This means that if a person remits Rs. 1,00,000 for education purposes, Rs. 500 will be collected as TCS.

This provision was introduced to regulate and track the flow of funds for education abroad and to ensure that appropriate taxes are collected. It helps in preventing tax evasion and ensures that the individuals remitting money for education contribute their share to the tax revenue.

Here is a quote from Albert Einstein that is relevant to the topic: “The only source of knowledge is experience.” This quote emphasizes the value of education and the importance of investing in it.

Interesting facts about TCS on foreign remittance for education:

  1. TCS is applicable only on foreign remittances made for educational purposes and not on other types of remittances such as travel or healthcare.
  2. The TCS rate may vary depending on the purpose of the remittance, and educational remittances have a separate rate.
  3. TCS is collected by authorized dealers or banks at the time of making the foreign remittance.
  4. The collected TCS amount needs to be deposited with the government and is reflected in the individual’s Form 26AS, which is a consolidated tax statement.
  5. Individuals who are exempt from income tax can claim a refund of the TCS amount while filing their income tax returns.
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Table: TCS Rates for Foreign Remittance for Education

Purpose | TCS Rate

Education | 0.5%

Note: The above table provides a general idea about the TCS rate and may be subject to change as per the provisions of the Indian Income Tax Act. It is always advisable to refer to the latest tax regulations or consult a tax expert for accurate information.

In conclusion, TCS is applicable on foreign remittance for education, and by collecting this tax, the government ensures transparency and accountability regarding funds being sent abroad for educational purposes.

Video response to your question

The video discusses the changes made to foreign remittance in the budget and explains the corresponding Tax Collected at Source (TCS) rates. Different categories of remittance are outlined, including educational purposes and foreign tour packages, each with their applicable TCS rates. From April 1, 2023, the TCS rate for tour packages will increase to 20%, while for all other cases of foreign remittance, except those mentioned, the TCS limit has been changed from 5% to 20%. TCS serves as an advance tax collected to track transactions and ensure proper tax compliance, reflecting in the taxpayer’s 26 AS form.

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How will TCS apply to educational expenses? Under LRS, there will be no TCS on foreign remittances below Rs 7 lakh for educational purposes. The remittances made for overseas education through an education loan paid abroad will attract a TCS of 0.5 per cent beyond a threshold limit of Rs 7 lakh.

For overseas education, a TCS will be charged if the money remitted abroad goes beyond Rs 7 lakh per financial year per person. Budget 2023 raised the Tax Collection at Source (TCS) rate for foreign remittances under the Liberalised Remittance Scheme (LRS) from 5 per cent to 20 per cent for select transactions.

For remittances made for education, the proposed TCS rate remains unchanged. In this case, you will be charged a TCS of 5% of the amount or the aggregate amount over Rs. 7 lakhs. So, the amount of TCS, in this case, will be { (8,00,000-7,00,000)*5/100}=Rs 5000. Same applies to buying/reloading a forex card for paying education fees abroad.

For TCS on remittance for travel and incidental expenses related to education and medical treatment, the rates of TCS as applicable to remittances for education and medical treatment, respectively, shall apply.

At present, under LRS, remittances made for foreign education, via an education loan paid abroad, attract a TCS of 0.5 per cent for the amount transferred beyond Rs 7 lakh. This will not change going forward either.

According to a clarification issued by the Finance Ministry on May 18, the old TCS rate will continue to apply to remittances for study abroad from July 1.

In case of foreign remittance for medical treatment and education-related foreign remittances made out of education loans, a TCS of 0.5% will apply for an amount exceeding Rs. 7 lakh. If the PAN is not provided to an authorised dealer of the foreign exchange, the TCS will be 10%.

A TCS of 5% applies for remittances towards overseas education and medical treatment exceeding INR 7 lakhs.

Yes, a person sending money more than 7 lakhs abroad in a financial year, has to pay an extra tax on amounts exceeding 7 lakhs. To provide relief to students who have taken education loans through a financial institution in India i.e banks or NBFCs, the rate of TCS shall only be 0.5% on amounts exceeding Rs 7 lakh.

The TCS rate and the threshold limit will apply for education abroad, depending on the nature of the dollar remittance. The new rates for Tax Collected at Source (TCS) on all international transactions will be applicable from July 1, 2023.

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