Paying TCS on remittances or foreign travel? Don’t forget to do these things to claim refund while filing ITR

The revised Tax Collected at Source or TCS regulations concerning remittances and foreign travel are being implemented starting from October 1. Under the new regulations, a 5 per cent TCS is applicable on foreign travel for amounts up to Rs 7 lakh, followed by a 20 per cent TCS for sums exceeding this threshold. Similarly, for foreign remittances under the Liberalised Remittance Scheme (LRS), it has been increased from 5 to 20 per cent for the threshold above Rs 7 lakh, except for education and medical reasons. 

TCS refers to the tax collected by the seller from the buyer during a sale, which is subsequently remitted to the tax authorities. It’s worth noting that TCS is not an additional tax. It can be adjusted against your overall income tax liability or reclaimed when filing your income tax returns (ITR). 

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What do you need to set off TCS against the tax liability? “The TCS amount can be set off against any tax liability arising during the year at the time of filing the tax return at the end of the year or refunded to the taxpayer in case TCS credits exceed the actual tax liability at the year end. To claim the TCS, the taxpayer should request the TCS certificate from the collector as evidence of such tax collected. Furthermore, the TCS amount also gets reflected in Form 26AS of the taxpayer, which can be downloaded from the TRACES website to cross-check whether TCS has been paid or not,” says Yeeshu Sehgal, Head of Tax Market at AKM Global, a tax and consulting firm. 

This year’s Union Budget introduced specific alterations to the TCS system for payments made under the LRS and for overseas tour program packages. These changes were slated to come into effect from July 1, 2023 but later the date got extended to October 1, 2023 with revisions. Furthermore, in March, it was revealed that credit card payments would be encompassed within the LRS. However later the finance ministry postponed the proposal to give adequate time to banks and card network companies to put in place requisite IT based solutions.  

Neeraj Agarwala, Partner at Nangia Andersen India, adds, “Individuals must ensure that the TCS is reflected in their Form 26AS and must maintain the bank transaction note of the remittance to match the amount of remittance and TCS collected, along with the purchase receipt. Tax credits of TCS will be available at the time of filing the income tax return.”