What is Liberalised Remittance Scheme (LRS)?

Under the Liberalised Remittance Scheme (LRS), all resident individuals (as defined under FEMA 1999), including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. Under the Liberalised Remittance Scheme (LRS), all resident individuals (as defined under FEMA 1999), including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both. It is mandatory for the resident individual to provide his/her Permanent Account Number (PAN) for all transactions under LRS.

What is the effective date of applicability of the TCS on foreign remittances under LRS ?

TCS on foreign remittance under LRS is effective on any remittance transaction under LRS on or after 1st October, 2020.TCS on foreign remittance under LRS is effective on any remittance transaction under LRS on or after 1st October, 2020.

What are the different purposes on which the tax collection is applicable?

The tax will be applicable on all remittance(s) that fall under the LRS of RBI.The tax will be applicable on all remittance(s) that fall under the LRS of RBI.

What all transactions will be impacted by this TCS provision?

All remittances more than Rs. 7 lakhs in a financial year done under the LRS will be liable for a 5% TCS except if the remittance is for education paid through a loan obtained from any financial institution, where the TCS rate would be 0.5%. All remittances more than Rs. 7 lakhs in a financial year done under the LRS will be liable for a 5% TCS except if the remittance is for education paid through a loan obtained from any financial institution, where the TCS rate would be 0.5%. The exemption from TCS on remittance overseas under LRS for amounts less than Rs. 7 lakh in a financial year will not be applicable, if the amount is being remitted for the purchase of overseas tour program package. Therefore, there is no monetary threshold prescribed for remittance for the purchase of overseas tour program package and bank will collect TCS on the entire amount irrespective of its value.

What is the new tax implication on remittances for pursuing overseas education?

TCS at 0.5% shall be applicable on the amount exceeding Rs. 7,00,000 in a financial year under LRS, if the amount remitted is obtained out of a loan from a Financial Institution for pursuing education. TCS at 0.5% shall be applicable on the amount exceeding Rs. 7,00,000 in a financial year under LRS, if the amount remitted is obtained out of a loan from a Financial Institution for pursuing education. For this purpose, ‘financial institution’ means a banking company to which the Banking Regulation Act, 1949 applies (including any bank or banking institution referred to in section 51 of that Act); or any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf. E.g. if the total amount remitted under LRS in a financial year is Rs. 8,00,000 for pursuing overseas education, TCS at 0.5% will be applicable on Rs. 1,00,000 (Rs. 8,00,000 – Rs. 7,00,000).

Kotak German Blocked Account

A Blocked account is a special type of bank account required for international students while planning to study in Germany. It is a mandate for visa applicant to have funds reserved / blocked in the account to show the proof of financing themselves during their planned stay in Germany. This testifies that the student can manage living and other expenses during their time in Germany.

Kotak Bank is the only Indian Bank authorized by German Embassy to open a Blocked Account (Sperrkonto) for students who wish to study in Germany. With Kotak’s German Blocked account, the applicant can conveniently open the account in a fast and secure way, that too without paying any account opening charges