Studying abroad just got more taxing

Garima Singh New Delhi | Updated on February 13, 2020

Going overseas: Parents have to shell out tax towards remittances of ₹7 lakh or more, which will attract Tax Collected at Source.

A Budget provision levies a tax on overseas remittance above ₹7 lakh in a financial year

Come April 1, parents will need to shell out more if their children are studying abroad.

This is because the Finance Bill 2020 prescribes an amendment to Section 206-C of the Income-Tax Act, 1961 to levy a TCS (Tax Collected at Source) on any overseas remittance of ₹7 lakh or more in a financial year. This will need to be collected by the authorised dealer. If the person remitting money has PAN/Aadhaar, the TCS rate will be 5 per cent, else the levy will be 10 per cent.

Terming the move as a harassment, a founder of a study- abroad platform said that this is an additional tax that parents will have to bear.

“It is also possibile that parents will pay one term fee from India and for the other terms they will try to arrange funds from friends and relatives based in of the countries where their children are studying,” said the person.

Experts suggest that of the total number of students who go abroad for higher education, 70 per cent go for Master’s or Ph.D. programmes.

A parent, on the condition of anonymity, said:, “This announcement is going to be a tough one for the parents as this is an extra burden on them for some period — till the time they file for the refund.”

Numbers may not dip

However, industry sources and parents both feel that there will not be any dip in the number of students going abroad for studies. Aarti Raote, Partner at Deloitte India, said that under the Liberalised Remittance Scheme (LRS) an individual is permitted to remit up to $2,50,000 abroad annually. This had greatly eased the administrative burden on parents paying for their children’s overseas education.

However, with the new provision, remittances of ₹7 lakh or more will attract TCS. “Those having tax liability in India would be able to claim a credit of the same against their Indian tax liability. Parents remitting money abroad should be cognizant of this provision and remit higher sums to cover for the tax collection at source in addition to the actual study fee,” she said.

She further said that the TCS credit is permitted to be set-off against the India tax liability of the buyer/payer. However, in case there is no tax liability, then getting such credit or refund would be possible only through a tax return filing in India.

Amit Singhania, Partner at Shardul Amarchand Mangaldas & Co, said: “Parents would be required to bear the burden of TCS while sending the money abroad for meeting educational expenses. This may increase the cost of overseas education if parents are unable to get credit for such taxes,”

(Inputs from Shishir Sinha)

Published on February 14, 2020

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