From July 1 onwards, whether it is spending on a foreign trip or investing abroad, is going to cost more as tax collected at source (TCS) on foreign remittances will become applicable.
In the Union Budget for 2023-24, Finance Minister Nirmala Sitharaman had announced that any outward remittances except for for medical and education purposes, will attract a TCS of 20 per cent on the entire value.
The increase in TCS rate under the Liberalised Remittance Scheme (LRS) is basically aimed at high value discretionary spending.
These will cover payments for foreign tours, purchasing foreign currency, sending gifts to friends or relatives abroad and buying foreign stocks among others.
In case of education related expenses for students studying abroad, if a parent is able to establish that the amount is for education purpose, then the TCS will be 5 per cent, in case the aggregate amount is more than Rs 7 lakhs.
If the amount is for tution fees or hostel expenses, then it is easier to establish the education link, but not if the student is living in a rented accommodation away from the campus while studying abroad.