The Budget 2020-21 has mandated a 5 per cent tax collection at source for remittances over Rs 7 lakh.
Mohandas Pai, Chairman, Aarin Capital has criticised the TDS on foreign remittances. He said: "This is very wrong; Why is there a Tax on our own tax paid money when we remit? Where is ease of living?."
Directionally, it looks like that money flowing out of India is being taxed in the form of remittances or travel. Some people have said that they will make the remittances for education by March 31 as the provision kicks in from April 1.
A new TDS provision has been introduced on foreign remittance. Authorized foreign exchange dealer receiving an amount of Rs 7 lakh or more in a financial year for remittance out of India under the LRS scheme of the RBI shall collect TCS (tax at source) of 5 per cent from the buyer, being a person remitting such amounts out of India. In the case of non PAN/Aadhar cases the rate is 10 per cent.
LRS is used for sending money for children studying abroad, buying property abroad and buying stocks listed in exchanges abroad. The LRS is limited to $250,000 per year per person. ON sending more than Rs 7 lakh year, 5 per cent of that amount will be deducted by the FX dealer and paid as TCS to the Income tax department.
A TDS provision has been introduced on tour packages also. The seller of overseas tour packages shall collect TCS of 5 per cent from the buyer.
The provision will not apply in case the operator is liable to deduct tax at source under any other provision of the act and the amount has been deducted. It will also not apply if the buyer is the government or any another person notified by the government
There is no lower limit on this provision. Travel operators are cribbing that this will hurt their business.
( With inputs from IANS )