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Major changes regarding Tax Collected at Source (TCS) & Liberalised Remittance Scheme (LRS) 

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Important changes w.r.t Liberalised Remittance Scheme (LRS) and Tax Collected at SourceOn 28th June 2023, the Ministry of Finance announced that there will be no changes in the rate of Tax Collection at Source (TCS) for all purposes under Liberalised Remittance Scheme (LRS) and for overseas travel tour packages, regardless of the mode of payment, for amounts up to Rs 7 lakh per individual per annum.

  • It was also announced that more time will be provided for the implementation of the revised TCS rates and also for the inclusion of credit card payments in LRS.


i.During the Union Budget 2023-24, major changes were announced to the system of TCS on payments under the LRS and overseas tour program packages.

  • These changes come into effect from 1st July 2023.

ii.In March 2023, it was also announced that credit card payments would be brought under the LRS

iii.Following these announcements, several comments and suggestions were received.

iv.In response to the suggestion, the Ministry of Finance has decided to make suitable changes.

Details of the changes: 

No change in TCS rates for all purposes under LRS & for overseas travel tour packages:

i.The Sub-section (1G) of section 206C of the Income-tax Act, 1961 provides TCS on foreign remittance through the LRS and on the sale of overseas tour program packages.

ii.Through Finance Act 2023, sub-section (1G) of section 206C of the Act was amended.

  • This increased the rate of TCS from 5% to 20% for remittance under LRS and for the purchase of overseas tour program packages. This also removed the threshold of Rs 7 lakh for triggering TCS on LRS.

iii.These amendments take effect from 1st July 2023.

Note: These are not applicable when the remittance is for education or medical purpose.

Overseas spending using credit cards not to attract TCS:

The government has postponed the implementation of its 16th May 2023 e-gazette notification which brought credit card expenses under LRS. This implies that the transactions through International Credit Cards, while overseas would not be counted as LRS and hence, would not be subject to TCS.

  • The Press Release dated 19th May 2023 which stated that TCS of 20% will be levied on individual payments above Rs 7 lakhs through international debit and credit cards from July 1, 2023 stands suspended.

Changes in TCS Rates: 

i.A threshold of Rs. 7 Lakh per financial year per individual in clause (i) of sub-section (1G) of section 206C shall be restored for TCS on all categories of LRS payments, through all modes of payment, regardless of the purpose:

  • Therefore, for first Rs 7 Lakh remittance under LRS there shall be no TCS.
  • Beyond the Rs 7 Lakh threshold, TCS shall be 0.5% for remittance for education financed by education loan; 5% for remittance for education or medical treatment and 20% for others.

ii.For the purchase of overseas tour program packages under Clause (ii) of Sub-section (1G), the TCS shall continue to apply at the rate of 5% for the first Rs 7 lakhs per individual per annum.

  • 20% rate will only apply for expenditures above Rs 7 lakh per individual per annum.

Increased TCS rates to apply from 1st October 2023: 

The changes in the TCS rates which were set to be implemented with effect from 1st July 2023 will now come into effect from 1st October 2023 with the above-mentioned modifications.

Overview of Changes in TCS Rates: 

Nature of PaymentRates before Finance Act 2023New rates wef 1st October 2023
LRS for education financed by a loanNil upto Rs 7 lakhNil upto Rs 7 lakh
0.5% above Rs 7 Lakh0.5% above Rs 7 Lakh
LRS for Medical treatment/ education (other than financed by loan)Nil upto Rs 7 lakhNil upto Rs 7 lakh
5% above Rs 7 Lakh5% above Rs 7 Lakh
LRS for other purposesNil upto Rs 7 lakhNil upto Rs 7 lakh
5% above Rs 7 Lakh20% above Rs 7 Lakh
Purchase of Overseas tour program package5% (without threshold)5% till Rs 7 Lakh, 20% thereafter


  • The TCS rates in the 2nd column shall continue to apply till 30th September 2023.
  • No TCS will be applied on expenditures under LRS under clause (i) of Sub-section (1G) for the first Rs 7 lakh, irrespective of the purpose.

Additional info: 

The necessary changes to the Rules (Foreign Exchange Management (Current Account Transactions Rules), 2000) will be issued separately.

The legislative amendment for this is yet to be proposed.

What is Tax Collection at Source (TCS)? 

TCS is a tax/payable collected by a seller of specified goods from the buyer at the time of sale over.

Such persons must have the Tax Collection Account Number to be able to collect TCS.

  • The goods are as specified under section 206C of the Income Tax Act, 1961.

What is Liberalised Remittance Scheme (LRS)?

LSR is a foreign exchange policy initiative introduced by the Reserve Bank of India(RBI) in 2004 with a limit of USD 25,000.

  • At present, Under the LRS, a resident individual can remit up to USD 250,000 per financial year for permissible transactions.

About Ministry of Finance: 

Union Minister– Nirmala Sitharaman(Rajya Sabha- Karnataka)
Minister of State– Dr Bhagwat Kishanrao Karad; Pankaj Chaudhary