In Budget 2024, the government has proposed changes to reduce higher tax deductions for individuals. Now, salaried employees can ask their employers to adjust Tax Collected at Source (TCS) in Tax Deducted at Source (TDS) on monthly salaries.
Taxpayers are required to pay TCS on certain expenses like foreign remittances, travel, or car purchase. Currently, salaried employees can declare additional income like bank interest or rent and tax-saving investments to their employers. The employer then adjusts tax deductions on monthly salary to account for such extra income or investments eligible for deduction. This allows employees not to worry about paying advance tax.
Advertisement
Now, employees can declare their TCS also to their employer, who will then adjust the tax deductions on their salary. This means lower TDS on monthly salary, and less cash flow problems. Additionally, if a tax refund is due because of TCS, it will be adjusted against TDS on salary, so employees won’t have to wait for it.
Last year in Budget 2023, TCS was increased on foreign remittances under the Liberalised Remittance Scheme (LRS) from 5% to 20%, from 1st July, 2023. It also included international credit card payments under LRS, which meant TCS on these transactions.
The high TCS rate was criticized by the public and industry experts. In response, the Finance Ministry rolled back the decision and set a Rs 7 lakh threshold for TCS application.
Starting from October 1, 2023, sending money abroad through bank transfers, foreign exchange, or loading forex cards will now incur a 20% Tax Collected at Source (TCS) if the amount exceeds Rs 7 lakh in a financial year. For amounts below Rs 7 lakh, no TCS is applied, except in certain situations.
For educational expenses, you won’t have to pay tax collected at source on foreign remittances below Rs 7 lakh. If you send more than Rs 7 lakh for education and it’s funded by a loan from an approved institution, the TCS rate is 0.5%. If the amount isn’t funded by a loan, the tax collected at source rate is 5%.
If you’re sending money abroad for medical treatment and the amount exceeds Rs 7 lakh, a 5% TCS will be applied.
Also Read: New Income Tax Slabs and Rates, Standard Deduction Hike, and Other Changes in Budget 2024
Travel expenses related to education and medical treatment are treated the same way, with the same TCS rates applied.
For overseas tour packages, if you spend up to Rs 7 lakh, the tax collected at source rate is 5%. For amounts over Rs 7 lakh, the TCS rate increases to 20%.
The Finance Ministry has excluded international credit card payments from the LRS. However, if you use a debit or forex card and spend more than Rs 7 lakh abroad in a financial year, a 20% TCS will be applied.
Want to learn the art and science of managing your money? The 1% Club can help. Details here
