New mechanism of Tax Collected at Source (TCS) on Liberalised Remittance Scheme (LRS) beyond a certain threshold to October 1. However, there is no clarity when transactions through International Credit Cards while being overseas would be counted as LRS and attract TCS.

There is no change in TCS norms on expenditure related with education and medical, but for other purposes and buying the overseas travel package beyond ₹ seven lakh, rate of TCS would rise to 20 per cent from five per cent.

New norms were to come into effect from July 1, but was deferred on account of preparedness of the system. LRS is part of the Foreign Exchange Management Act (FEMA) 1999 which lays down the guidelines for outward remittance from India. Under LRS, all resident individuals, including minors, are allowed to freely remit up to USD250,000 per financial year (April – March). This can be for any permissible current or capital account transaction, or a combination of both.

The guidelines issued by the Finance Ministry on June 30 prescribes remittance for purpose of education would include purchase of tickets of the person undertaking study overseas for commuting between lndia and the overseas destination, tuition and other fees to be paid to the educational institution and other day-to-day expenses required for undertaking such study.

Further, citing the RBI circular, the guidelines said education-related services such as tuition, food, accommodation, local transport and health services acquired by resident students while residing overseas will be part of education-related remittance. Tuition fee paid for correspondence courses abroad, where the person receiving education does not travel overseas, would also be covered under remittance for education.

There is no TCS in case of expenditure up to ₹ seven lakh in a year for education, financed by loans.There is no TCS in case of expenditure up to ₹ seven lakh in a year for education, financed by loans After this threshold, TCS rate is 0.5 per cent. In case of self-financed remittance, the threshold will be same, but the applicable TCS rate is five per cent.

On medical expense, remittance for the purpose of medical treatment will include purchase of tickets of the person to be treated medically overseas (and his attendant) for commuting between India and the overseas destination, his medical expense; and other day-to-day expenses required for such purpose. Here too, citing RBI circular, guidelines say expenses include those other healthcare, food, accommodation and local transport transactions. Also, transactions for health services rendered remotely or onsite (that is, no travel by service recipient is involved) will be part of remittance for medical. This cover services from hospitals, doctors, nurses, paramedical and similar services. TCS on LRS for medical treatment is NIL for expenses upto ₹ seven lakh, but five per cent for more than ₹ seven lakh.

Overseas Travel Package

The term ‘overseas tour program package’ will not mean just purchase of only international travel ticket or purchase of only hotel accommodation. “To qualify as ‘overseas tour program package’, the package should include at least two of the followings:- (i) international travel ticket, (ii) hotel accommodation (with or without food)/boarding/lodging, (iii) any other expenditure of similar nature or in relation. As on date, the rate of TCS on buying overseas tour program is 5 per cent with threshold. However, from October 01, the rate would be five per cent for expenses up to ₹ seven lakh and 20 per cent for more than ₹ seven lakh.