Tax on loans for study abroad

What are the important parameters of the TCS on foreign money transfers?

A 5% tax is applicable on an amount greater than INR 7 Lakh during a financial year (not on the total amount).

The new TCS provision is effective from 01 October 2020. Although the rule is effective from 01 October 2020, this exemption ceiling is applicable for the current financial year, i.e. from 01 April 2020 to 31 March 2021 .

If the amount is disbursed for overseas education purposes through a student loan from an authorized financial institution, the TCS on overseas education remittances will be 0 , 5% on the amount exceeding 7 lakhs INR.

The TCS will be cashed upon receipt of the amount, or upon debiting the amount payable, whichever comes first.

TCS rates are to be increased by an applicable surcharge and a health and education tax if the sender is a non-resident under the Income Tax Act 1961.

If the remitter does not provide his PAN details, the TCS will be 10% instead of 5%.

GST will not apply to the TCS amount.

The TCS will be reflected as a tax credit on Form 26AS. Therefore, the amount of the TCS can be claimed as a tax credit payable when filing the ITR. If the TCS is greater than your tax payable, you will be refunded.

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