Due dates for TDS/TCS (Q1_FY 2023-24) return filing extended

Vide the notification, CBDT has extended the time limits for submission of TDS and TCS return for the 1^st Quarter of FY 2023-24.

Generally, the due date for filing of TDS Returns (Form 24Q, 26Q, 27Q) and TCS return (Form 27EQ) is 31/07/2023 and 15/07/2023 respectively for the 1^st Quarter.

However, vide the notification, time limit for filing of the above returns has been extended to 30^th September 2023.

Government breather on new TCS regime, to come into effect October 1

Let us make an attempt to understand the changes in TCS Regime & allied amendments. For this, lets divide our discussion into three parts:

1. New TCS Rates
2. E gazette notification on 16^th May
3. Conclusion

Understanding the new TCS Rates:

It all started with the Union Budget 2023. An increase in TCS rates was proposed. The TCS rates for foreign remittances made under the Liberalized Remittance Scheme (LRS) for purposes other than education and medical, was proposed to be increased from 5% to 20% w.e.f 01/07/2023.

To add perspective to it, earlier, TCS was applicable at 5% on remittances exceeding ₹7,00,000/- per individual. Post the Finance Act 2023, the rates have been increased to 20% and the threshold of ₹700,000 is restored to all individuals. In basic terms, for every ₹1 remitted, ₹0.2 would be the TCS.

The Ministry of Finance, through its announcement has put off the dates of applicability of new TCS Rates from 1^st July 2023 to 01^st October 2023. As a result, the old TCS rates continues to remain effective until 30^th September 2023.

Understanding the e-gazette notification of Ministry of Finance dated 16th May 2023:

The Finance ministry vide the e-gazette notification on 16^th May 2023 came up with “Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023”.

What is this notification about? In layman’s terms, the government wanted to remove differential treatment for credit cards vis à vis other modes of drawal of foreign exchange under LRS. This will provide an avenue for Govt to collect TCS on international credit card transactions as well.

Technically, the foreground of the notification was omission of Rule 7 of “Foreign Exchange Management (Current Account Transactions) Rules, 2000”

Let us analyse the impact of this notification.

Simply put, Rule 7 states that use of international credit cards will not be covered under LRS. Therefore, the omission of Rule 7 ultimately means bringing transactions through international credit cards into LRS.

As a sigh of relief to the bankers & Taxpayers, Government decides to postpone implementation of the above said amendment to provide adequate time for banks and credit card networks to equip themselves to the change.

Hence, until it is implemented, Rule 7 stays intact (ie. International credit card is not covered under LRS).

Conclusion:

Based on the above discussions, the following are the key take aways:

1. New TCS Rates will be applicable from 1^st October 2023 and not from 1^st July as planned during the Budget 2023
2. Rule 7 omission stands postponed, hence transactions through international credit card will be out of the ambit of LRS until further notification. Hence, no TCS is applicable on such transaction until the omission is implemented.