Have overseas shares in inventory portfolio? New tax rule making use of from subsequent month

20% TCS rule from October 1: Individuals who’re investing in overseas shares, mutual funds, or cryptocurrencies overseas must pay extra TCS in the event that they spend past a certain quantity in a monetary yr as mounted by the federal government. The tax assortment at supply (TCS) fee on foreign exchange outward remittances by resident people beneath Liberalised Remittance Scheme (LRS) has been hiked. Starting 1 October 2023, the brand new TCS fee for foreign exchange outward remittance might be relevant.

What is TCS?

The tax assortment at supply or TCS is collected by the vendor on the level of sale. Banks deduct TCS on overseas remittances.

TCS restrict for overseas remittances

The TCS restrict for overseas remittances in India is at the moment set at 5% for all overseas remittances exceeding ₹7 lakh in a monetary yr. But from 1 October 2023, the brand new TCS fee might be 20%.

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TCS on investments equivalent to shopping for shares and mutual funds

On overseas remittances for abroad funding, a 20% TCS might be levied over a threshold restrict. A 20% TCS fee might be utilized on investments of greater than ₹7 lakh in overseas shares, mutual funds, cryptocurrencies, or property in a monetary yr.

TCS on debit, credit score, or foreign exchange playing cards

While bank card transactions are exempted from TCS, debit or foreign exchange playing cards will appeal to 20% from October 1 if the spending exceeds ₹7 lakh.

According to Divakar Vijayasarathy, Founder, and CEO, of DVS Advisors, TCS at 20% could not affect the web price people (HNIs) a lot because the credit score of TCS would scale back their advance tax legal responsibility. 

For different remitters, who shouldn’t have important tax legal responsibility, the elevated TCS fee can be an added value of remittance because the refund of TCS can be accessible solely on the time of submitting their return of revenue, he added.

The TCS fee on remittances for the aim of training and medical therapy stays unchanged at 5% above a threshold restrict of seven lacs. The TCS collected can be accessible as credit score whereas discharging the revenue tax due.

“Historically, contemplating the previous 5 years common, the best remittance beneath LRS has been in the direction of overseas journey (37%), adopted by remittance for training functions (24%), upkeep of relations (18%) and reward (11%). Travel consists of each journey for the aim of enterprise and leisure,” said Divakar Vijayasarathy.

Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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Updated: 25 Sep 2023, 01:57 PM IST