Outward remittances under the Reserve Bank of India’s (RBI’s) Liberalised Remittance Scheme (LRS) declined by over 16 per cent in May 2024 from the year-ago period due to the base effect.
- According to the latest RBI bulletin, remittances under the scheme stood at $2.42 billion in May 2024, 16.18 per cent lower than the year-ago period.
- During the Union Budget for FY23, the government proposed to raise tax collection at source (TCS) to 20 per cent from 5 per cent on amounts exceeding Rs 7 lakh for all purposes, except for education Tax.
- TCS or tax collection at source is the tax which is collected by sellers while selling something to buyers. TCS deduction is applicable on sales of goods like timber, scrap, mineral wood, and so on.
- TCS is applicable on sales of specific goods which don’t include production or manufacturing material.
- Starting Oct 1, 2023, the Government introduced TCS rate of 20 percent on foreign remittances of more than ₹7 lakh in a financial year. The higher rate will not apply to education expenses incurred abroad or for medical reasons. The earlier rate of tax was 5 percent. The higher TCS rate of 20 percent is applicable on foreign remittances through the liberalised remittances scheme of RBI and on the sale of overseas tour packages.
- The tax law mandates that certain persons being the sellers must collect a percentage of tax at the time of receipt of money from the buyers.
- Apart from sale of goods, every person who enters into an agreement of lease, licence or contract for parking lot, toll plaza or mining or quarrying will collect an amount at the rate of 2 percent from such parties as TCS.
