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PURCHASE of an international travel ticket, hotel accommodation or any other expenditure of similar nature — at least two of these expenses would qualify as overseas tour package under the Liberalised Remittance Scheme and hence, attract tax collected at source (TCS), the Central Board of Direct Taxes (CBDT) under Ministry of Finance clarified in a circular issued Friday.
The government has also clarified about the eligible expenses for medical and education, keeping incidental expenses for both categories within the ambit of LRS as against the earlier expectation of a separate tax treatment.
The circular said to qualify as ‘overseas tour program package’, the “package should include at least two of the following: (i)international travel ticket, (ii) hotel accommodation (with or without food)/boarding/lodging, (iii) any other expenditure of similar nature or in relation thereto.” Purchase of only an international travel ticket or purchase of only hotel accommodation, by itself, is not covered within the definition of ‘overseas tour program package’, it said.
For medical expenses, the circular said it would include “remittance for purchase of tickets of the person to be treated medically overseas (and his attendant) for commuting between India and the overseas destination; medical expense; and other day to day expenses required for such purpose”.
Remittance for the purpose of education will include “purchase of tickets of the person undertaking study overseas for commuting between India and the overseas destination; the tuition and other fees to be paid to an educational institute; and other day to day expenses required for undertaking such study”.
In addition, authorised dealers, foreign exchange dealers and sellers of overseas tour packages will have to take an “undertaking” from customers about their past remittances and overseas travel during a financial year for the purpose of deducting TCS.
The CBDT said since the facility to provide real time update of remittances is still under development by the RBl, it is clarified that the details of earlier remittances under LRS by the remitter during the financial year may be taken by the authorised dealer through an undertaking at the time of remittance. “lf the authorised dealer correctly collects the tax at source based on information given in this undertaking, he will not be treated as ‘assessee in default’. However, for any false information in the undertaking, appropriate action may be taken against the remitter under the Act,” it said, adding that the same methodology of taking undertaking from the buyer of an overseas tour program package may be followed by the seller of such package.
On Wednesday, in a reversal of its earlier decision, the government had decided to defer the decision to include international credit card spends outside India under the LRS, implying there will be no levy of TCS on international credit card spends outside India as of now. The government had also extended the timeline to levy the higher proposed TCS rates with effect from October 1 instead of July 1 this year.
There will be no TCS up to Rs 7 lakh remittance under LRS. Beyond this Rs 7 lakh threshold, TCS shall be levied at the rate of 0.5 per cent (if remittance for education is financed by education loan); 5 per cent (in case of remittance for education/medical treatment); and 20 per cent for others. Currently, remittances under LRS attract 5 per cent TCS over the Rs 7 lakh threshold, except education financed by loan which faces a levy of 0.5 per cent. Remittances up to Rs 7 lakh for medical and education purposes are exempt from TCS.
On purchase of overseas tour packages, TCS of 5 per cent will be applicable on payments up to Rs 7 lakh. Above the Rs 7 lakh threshold, 20 per cent TCS would be levied from October 1. Currently, overseas tour packages under LRS attract 5 per cent TCS and there is no threshold. Under LRS, all resident individuals, including minors, can remit up to US $250,000 (approximately Rs 2.06 crore) abroad per year without prior approval from the RBI.
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