The Central Board of Direct Taxes (CBDT) has recently unveiled new income tax forms that will bring about modifications to tax regulations. With these updates, various individuals will now have the option to claim Tax Collected at Source (TCS) credits in lieu of the original payer. This amendment proves particularly advantageous for individuals encountering expenses pertaining to overseas travel and education.
Restructuring TCS Credit for External Expenses
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The updated tax regulations now permit a different individual to garner the TCS credit, apart from the original payer. This modification aims to empower taxpayers in handling their tax obligations more efficiently. This reform enables parents or legal guardians, who have paid TCS for their children's tuition fees abroad, to transfer the credit to their own tax returns.
The aim of this flexibility is to lessen the financial burden on families. In the past, only the child was eligible to claim it, but now parents can also take advantage of this, thereby lowering their total tax liability.
In accordance with the regulation, the Tax Collected at Source (TCS) will be implemented if the overseas remittance surpasses Rs 7 lakh. The 5% TCS will be enforced as the individual is making the payment.
Claiming the TCS Credit
In order to claim the TCS credit, individuals must follow the process outlined below:
The collectee who made the payment must provide a declaration to the tax collector (such as a bank or institution collecting the TCS). This declaration should specify that the credit should be applied to another person's PAN.
Required information:
Name and address of the individual claiming the credit.
Permanent Account Number (PAN) of the recipient.
Amount of TCS paid on the expenses.
Form 12BAA
The CBDT has recently unveiled a new form, Form 12BAA, designed for the reporting of non-salary income and the inclusion of Tax Collected at Source (TCS) details. These forms, aligned with the directives specified in the Union Budget 2024, will streamline the process of offsetting Tax Deducted at Source (TDS) and TCS amounts collected from sources other than salary against the TDS on salary.
The Form 12BAA is a statement that outlines specific details for sub-section (2B) of section 192. Employees must utilize this newly introduced form to notify their employers of any deductions made from income obtained from sources other than their salaries. These sources may encompass revenue from fixed deposits, commission from insurance policies, dividends from equity investments, or taxes levied during the acquisition of goods or services like vehicles or foreign currency.