FAQ’s about LRS and New TCS Regime Circular no. 10/2023, Dated 30th June 2023

In the previous article about LRS and new TCS Regime, we had discussed about the following:

  1. New TCS Regime and its postponement of implementation to 1st October 2023. (Ie. Increasing TCS Rates from 5% to 20%, removal of threshold of ₹700,000)
  2. E gazette notification on 16th May 2023 to remove differential treatment of credit card and to streamline it through LRS. Please do refer to the previous write up to decipher and appreciate this article better. The above changes were postponed, providing more time for the banking channels and credit card network to equip themselves to change. Various comments about practical difficulties that arise from the above changes were received. As a measure to address these issues, the Ministry of Finance has issued a press release dated 28th June 2023 wherein the following decisions were concurred upon.

(i) Threshold of ₹700,000 per person per annum is restored for all categories of LRS. In other words, no TCS shall be levied on LRS upto ₹700,000 irrespective of the purpose.

TCS rates shall be on amount in excess of ₹700,000:

A. 0.5% (If remittance is financed by loan taken from financial institution)

B. 5% (In case of remittance for medical/educational purposes.

C. 20% for others.

One important point to pay heed to is that TCS on overseas tour package will be at 5% upto ₹700,000 and 20% on amount in excess of ₹700,000

As mentioned in the last article, increased TCS rates shall come to effect from 1st October 2023.

Also, the Ministry has provided guidelines on this regard. Let us try to understand the guidance and FAQ’s at length.

  1. As hinted in the previous article, payment through international credit card would not be counted under LRS for the time being. Hence no TCS shall be applicable on it.
  2. The threshold of ₹700,000 is per person per annum irrespective of the purpose. To add perspective to it, If Mr X makes a remittance of ₹700,000 for medical purposes, ₹700,000 for other purposes, TCS is applicable at the prescribed rates because ₹700,000 thresholds on an aggregate basis is breached.
  3. A common question which is raised is, since the TCS rates are changing from October 1st 2023, ₹700,000 is the threshold applicable for half year or full year. Well, the answer is that the limit is prescribed per annum per person. Hence ₹700,000 limit is applicable for whole year.
  4. A resident individual spends Rs 3 lakh for purchase of overseas tour program package from a foreign tour operator and remits money which is classified under LRS. There is no other remittance under LRS or purchase of overseas tour program during the financial year. Whether TCS is applicable? TCS on Overseas tour package is applicable at 5% upto ₹700,000 and 20% on amount in excess of ₹700,000. Therefore, TCS is applicable at 5%*300,000 = 15000.
  5. What is the scope of “medical”? As per the clarification by the RBl, remittance for the purposes of medical treatment shall include,- (i) remittance for purchase of tickets of the person to be treated medically overseas(and his attendant) for commuting between lndia and the overseas destination; (ii) his medical expense; and (iii) other day-to-day expenses required for such a purpose.
  6. What is the scope of “Education”? Education Remittance for purpose of education shall include,- (i) remittance for purchase of tickets of the person undertaking study overseas for commuting between lndia and the overseas destination; (ii) the tuition and other fees to be paid to educational institute; and (iii) other day to day expenses required for undertaking such study
  7. What is an overseas tour package? The term ‘overseas tour program package’ is defined as to mean any tour package which offers visit to a country or countries or territory or territories outside lndia and includes expenses for travel or hotel stay or boarding or lodging or any other expenditure of similar nature or in relation thereto.
  8. Does purchase of international travel ticket and hotel accommodation on standalone basis qualify as overseas tour package? As per the definition of “Overseas tour package”, it should be a combination of accommodation, international travel ticket and expenditures of similar nature.