Finance Minister Nirmala Sitharaman made several announcements in the Union Budget 2023-2024 on Wednesday. From increasing the income tax rebate limit from Rs 5 lakh to Rs 7 lakh under new tax regime to allocating Rs 2.4 lakh crore for Railways and beyond, the Budget 2023-24 has been hailed by Indian companies. There's an important change for foreign investors in the Budget, as the rate of TCS of certain overseas remittance has been increased.
If you're investing in foreign stocks or buying properties abroad, there's an important change in the Budget 2023. FM Sitharaman has proposed to increase the TCS (Tax Collection at Source) on certain overseas remittances with the exception for education purposes. The TCS stands at 5 per cent for the purpose of education.
Literally meaning, Tax Collected at Source (TCS) is different from Tax Deducted at Source, since TCS can be taken by the individual as a refund while filing ITR.
If the amount being remitted out is a loan obtained from any financial institution under Section 80E for the purpose of education or for medical treatment abroad, the TCS stands at 0.5% and 5% respectively.
Those planning to travel abroad or wishing to invest in overseas stock have a challenge ahead. The TCS limit, on foreign tour packages and for other remittances such as purchasing stocks or properties abroad, has been proposed to be 20% in the Budget 2023. Notably, the TCS of 20% on buying global stocks and properties abroad will be 20% without any threshold limit.
The TCS for overseas tour packages has been increased from 5% to 20% for high-cost tour packages above Rs 50 lakh. The LRS (Liberalised Remittances Scheme) of RBI allows individuals to send up to Rs 2 crore for overseas medical treatment, educational expenses or buying properties or stocks listed on NASDAQ. Currently, there is TCS of upto 5% on remittances of Rs 7 lakh or more in a fiscal year. While the TCS can be claimed after filing income tax returns at the end of the year, but it will be increase the immediate overlay for many people. Which is why it's unlikely that many will be okay having their 20% capital blocked until a year. The amendment will take effect from July 1, 2023.
For retail investors, I guess the only material change in the budget is for people who invest in international stocks. Money sent out using LRS now has a Tax Collection at Source (TCS) of 20% with no upper or lower threshold, compared to 5% over Rs 7lks earlier. 1/3 pic.twitter.com/LTFoXfIcRR
— Nithin Kamath (@Nithin0dha) February 1, 2023
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