Indians sending money abroad for education under LRS nearly at pre-Covid level

The Finance Ministry on Monday informed Lok Sabha that over $17 billion remitted abroad under Liberalised Remittance Scheme (LRS) in 2021. This is almost equal to pre-Covid period. It also said that representations have been received for removal of import duty on raw cotton.

Import Duty

In a written reply, Finance Minister Nirmala Sitharaman acknowledged representation about removal of import duty on raw cotton. At present, it attracts Basic Customs Duty (BCD) at the rate of 5 per cent, Agriculture Infrastructure and Development Cess (AIDC) at the rate of 5 per cent and Social Welfare Surcharge (SWS) at the rate of 1 per cent on raw cotton.

She said that the decision to impose 5 per cent BCD and 5 per cent AIDC on imports of raw cotton in Union Budget 2021-22 was taken to benefit domestic cotton farmers. Imports of cotton had surged significantly in last few years, even though India is the largest producer of cotton in the world.

All varieties of cotton, including those which were produced in India were being imported in large quantities. This has impacted the Indian farmer adversely. “Garment exporters would not be affected as exporters have the option of availing of benefit of schemes like advance authorization, duty drawback, EoU, SEZ etc. Further, RoSCTL scheme for garment and made-ups has also been extended till March 2024,” she said while adding that further incentives under various schemes are also being provided to Garment sector.

Remittance

In response to another question, Minister of State for Finance, Pankaj Chaudhary informed the house in a written reply that total amount remitted abroad under LRS touched $17.75 billion crore in 2021. It was $13.57 billion in 2020 and $17.77 billion in 2019.

Under the LRS, all resident individuals, including minors, are allowed to freely remit up to $0.25 million per financial year (April-March) for any permissible current or capital account transaction or a combination of both. Further, resident individuals can avail of foreign exchange facility within the limit of $0.25 million for studies abroad or for expenses in connection with medical treatment abroad, etc .

The scheme was introduced on February 4, 2004, with a limit of $25,000. The LRS limit has been revised in stages consistent with prevailing macro and micro economic conditions.

Collection and utilisation of cess

Replying to a question on cess, Sitharaman said that government has estimated to collect over ₹53,000 crore as Health & Education Cess, while utilisation of cess is estimated at over ₹86,000 crore.

Collection of cess includes cess on income tax and on other taxes as well. For the period 2013-14 to 2020-21, collection of cess is as per Finance Accounts i.e. it gives figures for actual collection of cess. Utilisation is assumed as per actual expenditure in the schemes to be funded.

By Finance Act, 2018, ‘Education Cess’ and ‘Secondary and Higher Education Cess’ totalling @ 3 per cent was replaced by ‘Health and Education Cess’ @ 4 per cent with effect from Assessment Year 19-20 (i.e. Financial Year 2018-19).

The Health and Education Cess is the part of the Central Tax, which is not shareable with States. However, Central Government releases share in shareable Central Taxes/ Duties to State Governments as “Tax devolution” in accordance with approved from the year 2013-14 till date. There is no pendency as regards tax devolution to States, she said.

COMMENT NOW