On May 16, 2023, the Finance Ministry announced a 20% tax collection at source (TCS) for all foreign transactions beginning July 1, 2023
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This comes under the Liberalised Remittance Scheme (LRS)
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The government later clarified that payments up to ₹7 lakh per financial year made using international debit or credit cards would not be subjected to TCS
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However, for students studying abroad, if the tuition fee is remitted through an education loan, it will be exempted from the 20% TCS. Only 0.5% TCS will be charged on the same
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If source of funding is not an education loan, then money transferred overseas for the purpose of education will be subject to TCS at 5%, if the amount is above ₹7 lakh
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Parents sending any remittances towards meeting the living expenses for their children studying abroad will have to pay a TCS of 20% as it is not a direct educational expense
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If one can prove that the remittances sent abroad are for educational purposes like university provided accomodation (with proper documentation), then 5% TCS will be applicable for the same
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For transactions that do not prove that they have been transferred for educational purposes, a 20% TCS will be applicable
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You can get a refund of the amount deducted by TCS by filing your Income Tax Return (ITR)