TCS on Education Related Transfers

This guide is tailored for individuals making outward remittances specifically for educational purposes, such as paying university fees abroad. It aims to provide clarity on Tax Collected at Source (TCS) regulations and how they affect the outstanding amount of your remittance.

Recent Policy Change

The 2023 Union Budget introduced major changes to tax collection on foreign remittances under the Liberalised Remittance Scheme (LRS), impacting Indian students planning to study abroad. Tax Collection at Source (TCS) involves deducting a percentage of tax from the payee when receiving payment, applicable to foreign remittances in India. 

It's crucial for students sending money internationally for education to understand these changes.

First, it's important to note that Tax Collection at Source (TCS) isn't necessarily an additional cost, as it can be adjusted.

Here's how:

1. TCS Adjustment: TCS can be adjusted against your total income tax liability or refunded, providing flexibility in managing your tax obligations.
2. Advance Tax Payments: You can adjust TCS in your advance tax payments or claim it while filing your income tax returns, ensuring compliance with tax regulations.
3. Salaried Employees: If you're a salaried employee, your employer may adjust TCS against the Tax Deducted at Source (TDS) payable, simplifying the tax process.

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TCS is applicable to education-related remittances in the following manner:

• No TCS is charged for remittances up to Rs. 7 lakhs, easing the burden on smaller transactions.
• However, for remittances exceeding Rs. 7 lakhs:some text
  • If the amount is transferred using an education loan, a concessional TCS rate of 0.5% applies.
  • If the remittance is not funded through a loan, the TCS rate increases to 5%.

These regulations provide clarity on TCS implications for educational remittances, ensuring transparency and compliance with tax requirements.

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Consider this scenario: If you send Rs. 10 lakhs abroad for education using personal funds, you'll pay 5% TCS only on the surplus over Rs. 7 lakhs (i.e., Rs. 3 lakhs). Thus, the TCS amount would be 5% of Rs. 3 lakhs, totaling Rs. 15,000.

Conversely, if the source is an education loan, the TCS rate is only 0.5%, applied to the surplus over Rs. 7 lakhs. In this case, the TCS amount would be 0.5% of Rs. 3 lakhs, amounting to Rs. 1,500.

Documents and Steps for Remittance

When remitting money under the Liberalised Remittance Scheme (LRS), parents or remitters need to submit the following documents to the bank:

1. Form A2 cum LRS Declaration Form: This form is necessary for initiating the remittance process under the LRS.
2. Additional Documentation for Education Loan Remittances: If the remittance is made from an education loan, specific documentation is required to ensure compliance with TCS rules. These documents include an education loan sanction letter and declaration.
3. Passport and PAN Card: Proof of identity and tax identification.
4. Supporting Documents: Such as tickets, invoices, or any other relevant receipts.
5. Undertakings and Declaration: These are required to share details about earlier remittances made under any purpose mentioned under LRS in the current financial year.
6. Any other document as may be required by the authorised dealer through which you are remitting money abroad - as per RBI Guidelines.

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Ensuring the submission of these documents facilitates a smooth and compliant remittance process under the LRS.

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Steps to Claim TCS

Understanding the detailed income tax filing procedure in India is crucial. Here's a breakdown:

1. Gather Relevant Documents: Collect all necessary documents, including income statements, investment proofs, and Form 26AS.
2. Verify TCS in Form 26AS: Check Form 26AS to verify the Tax Collected at Source (TCS) amounts deducted on your transactions.
3. Prepare to File the Income Tax Return (ITR): Ensure you have all the required information and documents ready for filing your ITR.
4. Declare TCS in the ITR: While filing your ITR, declare the TCS amounts paid during the financial year accurately.
5. Claim TCS Amount as Tax Credit: The TCS paid while transferring money is not an additional expense but an advance payment to the government. You can claim it back while filing your return. If your tax liability is less than the TCS amount, you can reduce it from your tax liability. If your tax liability is zero or negative, you will receive a refund for the entire TCS amount.
6. File Your ITR to Claim TCS: Your TCS amount will be reflected in Form 26AS, which you can view by logging into the Income Tax portal. Make sure to file your ITR to claim the TCS amount.

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Here's how we can assist you:

At Supreme Forex, we've assisted over 2 lac+ students in remitting their fees abroad to universities in the US, UK, Canada, Australia, and more. Our personalized guidance ensures optimized transfers abroad with the best exchange rates offered by our branches while ensuring proper compliance with RBI guidelines.

Supreme Forex is the digital brand of Supreme Securities Limited, duly authorized as AD-II by the Reserve Bank of India. This authorization enables us to offer outward remittance services for specified purposes. Trust us to facilitate your international transactions seamlessly and securely, backed by our expertise and regulatory compliance.

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Have any further questions? Call us anytime from 10AM to 6PM on +91 7303524400 and we'll be happy to help you!