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Save 20% TCS: New Rules for Sending Money for Study Abroad
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The Ministry of Finance has provided much-needed clarity on the taxation of foreign remittances through the tax collected at source (TCS) mechanism. This clarification brings relief to parents who financially support their child's education abroad. To avoid unnecessary financial burdens, one must gain a clear understanding of the specific details of TCS.
By being well-informed about the regulations and requirements, parents can confidently navigate the remittance process, ensuring that they make informed decisions and avoid excessive payments. This recent clarification from the Ministry of Finance empowers parents to effectively manage their financial obligations and provide the best possible educational opportunities for unnecessary financial strain.
Leveraging the Liberalised Remittance Scheme (LRS)
The Liberalised Remittance Scheme (LRS) allows parents to send up to Rs $250,000 in a financial year for education-related expenses. Permission from the Reserve Bank of India is required for remittances exceeding this limit.
Under the LRS, parents can remit up to Rs 7 lakh annually for education purposes without TCS. However, if the remittances exceed this threshold and are financed by an approved financial institution's loan, a TCS of 0.05 % will apply. For remittances exceeding Rs 7 lakh for education without a loan, a TCS of 5 % will be applicable.
For example, if you remit Rs 9,00,000 abroad for education under the LRS in a financial year without a loan, a TCS of 5 % will be charged on the amount exceeding Rs 7 lakhs, resulting in a TCS of Rs 10,000.
It's important to note that the current TCS rates for sending money through LRS for a child's education will remain in effect until October 1, 2023. Expenses considered educational will remain unaffected after this deadline. However, related expenses not explicitly under education may be subject to different rules.
The Ministry of Finance has defined education-related expenses, including commuting tickets, tuition and other fees, and day-to-day expenses like food, accommodation, local transport, and health services. Gradding.com, a leading study abroad platform, can assist you in managing these expenses efficiently, ensuring compliance with regulations and benefiting from lower TCS rates.
Important Documents to Send Money Abroad TCS-Free
When remitting money under the LRS, submit Form A2 cum LRS declaration form to the bank. Specify the purpose of remittance, such as tuition fees, accommodation fees, travel expenses, or incidental expenses. Include essential details like the student's name, ID, and university name.
Maintain proper track of LRS codes and mention the correct code when remitting money. We offer assistance in understanding and using the appropriate codes. The Reserve Bank of India has specific codes for education-related transactions, covering services like tuition, food, accommodation, local transport, and health services for resident students studying abroad.
No TCS will be collected for amounts up to Rs 7 lakh per financial year per individual under the LRS, regardless of the purpose. For remittances exceeding Rs 7 lakh, TCS rates can go up to 20 %, depending on the transaction's nature. We guide you through the process to ensure you benefit from reduced TCS rates.
To avoid discrepancies, provide an undertaking to the authorised dealer, disclosing details of previous remittances made under any purpose mentioned in the LRS during the current financial year. Authorised dealers consider previous remittances exceeding Rs 7 lakh made with other authorised dealers. Gradding.com helps navigate this requirement, ensuring accurate information is provided to avoid penalties.
Be aware of additional declarations banks request based on a circular dated June 30, 2023, to confirm the remitted amount does not exceed Rs 7,00,000. Gradding.com guides to ensure compliance. The responsibility lies with the remitter to provide correct information.
Accurately calculate potential TCS obligations by tracking the total remittance amount. The Rs 7 lakh threshold for LRS applies to all transactions, regardless of purpose. Gradding.com's expertise helps manage expenses while remaining within the limit.
Simplifying the Remittance Process with Gradding.com
In conclusion, the Ministry of Finance has provided much-needed clarity on the taxation of foreign remittances through the TCS mechanism, significantly benefiting parents who support their child's education abroad. Understanding the specific details of TCS and complying with the regulations are crucial steps to avoid incurring excessive payments.
In this journey, Gradding.com, a trusted study abroad platform, stands by your side, offering unwavering support and expert guidance. Their dedicated team ensures accurate categorization of expenses, adherence to regulatory requirements, and optimization of your educational expenses. With Gradding.com's expertise and assistance, you can confidently navigate the remittance process, seizing the best educational opportunities for your child and fostering their academic success.
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