Tax on LRS remittance is not an additional cost. Here’s all you want to know

By Viram Shah From October 1, authorised dealers, typically banks and remittance companies will collect 5% tax at source once LRS remittance made by an individual crosses 7 lakh in a financial year. The Union Budget 2020 proposed a 5% TCS on remittances undertaken via the Liberalised Remittance Scheme above ₹7 lakh. ₹15,000 will be deducted as TCS 2) For the current financial year, any remittances made post March 2020 will count towards the 7 lakh threshold. Scenario 1: Google employee with a 20 lakh annual salary Rahul who works at Google wants to remit ₹ 10 lakh to invest in the US markets 10 lakh to invest in the US markets His monthly salary includes a ₹ 15,000 TDS or Tax Deduction at Source 15,000 TDS or Tax Deduction at Source This TDS can vary based on how the salary is structured, but ₹ 15,000 is a reasonable estimate 15,000 is a reasonable estimate Under the new rule, the bank through which he undertakes the remittance will deduct ₹ 15,000 as TCS 15,000 as TCS Now Rahul has two options: 1) He can claim the 15,000 as credit when he files his income taxes and reduce his tax payable then, or 2) He can submit his TCS certificate to Google and get his monthly TDS reduced by ₹3,000, thus increasing his in-hand salary Scenario 2: Business owner with 30 lakh as annual profits