Budget 2020: Overseas Tours, Foreign Remittances, Set To Become More Expensive
Sending money abroad or visiting international destinations is set to become more expensive.
Sending money abroad or visiting international destinations is set to become more expensive, with the government proposing an additional levy on both the activities.
The government, according to a proposal in this year’s Union Budget, will impose a 5 percent tax collected at source on foreign remittances and overseas tour packages run by individuals to widen its tax base.
Accordingly, the government authorises foreign exchange dealers to collect 5 percent of their remittance amount as income tax on a payment of more than Rs 7 Lakh under the liberalised remittance scheme of the Reserve Bank of India. It also authorises sellers of overseas tour programme packages to collect 5 percent of the package amount as income tax.
Indians travelling abroad or those intending to send money overseas, under the LRS scheme, will pay 5 percent more than the transaction amount at the time of purchase. The additional amount, however, can be offset at the time of filing of tax returns.
“Budget 2020 has introduced TCS (tax collected at source) levy on remittances made under the LRS in its bid to leave a trail on remittances made by residents above Rs 7 lakh,” Arvind Rao, founder of Arvind Rao & Associates, told BloombergQuint. “Very similar to the 1 percent TCS that’s collected when you buy a motor car, the budget has proposed a 5 percent levy on the remittances made under LRS and the onus is on the authorised dealers to collect and deposit the TCS.”
The liberalised remittance scheme, according to the Reserve Bank of India’s website, allows individuals to avail foreign exchange facility for purposes like:
- Private visits to any country (except Nepal and Bhutan)
- Gift or donation.
- Going abroad for employment.
- Emigration.
- Maintenance of close relatives abroad.
- Travel for business or attending a conference or specialised training or for meeting medical expenses abroad, or for accompanying as attendant to patients going out of India for medical treatment/check-up.
- Expenses in connection with international medical treatment.
- Studying abroad.
- Any other current account transaction which is not covered under the definition of current account in Foreign Exchange Management Act, 1999.
The TCS on foreign remittances under the LRS scheme will entail a 5 percent additional cash outflow for payers, according to Shefali Goradia, partner at Deloitte. It can only be adjusted at the time of filing the tax return, she said.