Increase in TCS under LRS is to target discretionary spending: Revenue Secy
New Delhi, February 3, 2023
TCS on remittances made under the LRS was introduced in 2020
The decision to increase the tax collection at source (TCS) rate for foreign remittances under the Liberalised Remittance Scheme (LRS) is to target the discretionary spending, arising out of taxable income and not the savings, Revenue Secretary Sanjay Malhotra said on Friday.
“Our sense of LRS is that the expenses of students or relatives is certainly not going out of savings, such as fixed deposits, and medical and education has already been kept out. These are discretionary spending coming out of taxable income and not from saving. The honest people are not losing anything,” he said at a post-Budget interactive session by the Confederation of Indian Industries (CII).
In her Budget speech, Finance Minister Nirmala Sitharaman had announced to raise the TCS rate for foreign remittances under the LRS from 5 per cent to 20 per cent, to be applicable on overseas tour packages and other remittances except for education and medical purposes.
TCS on remittances made under the LRS was introduced in 2020 to monitor the remittances made and to correlate these with the income tax returns of the persons who made the remittances. Presently, different rates of TCS apply depending on the nature of the transaction.
Earlier in the day, speaking at an ASSOCHAM event about the intent of the new taxation regime, Central Board of Direct Taxes (CBDT) Chairman Nitin Gupta said the central government wanted to ensure that the benefits of the new tax regime trickled down to each and every section of the taxpayer community.
“It does not require the taxpayer to maintain any documentation and is easier for the tax administration to administer the regime. The experience has been very positive in the corporate sector where the induction of deduction and exemption-free regime has been introduced, and we anticipate that the response to the proposal will be fantastic,” he added.
Besides, answering a question on the impact of removal of exemption for savings in the economy, Malhotra said savings related to tax exemptions stand at a very low number of Rs 5 trillion, which is a small proportion of total savings made by taxpayers.
“Few schemes announced in the Budget, especially for senior citizens and women, will help the country in improving the savings rate, and the market will certainly recalibrate and find the right levels and make it more attractive for people to save so that the country has enough money to invest,” he said.
The revenue secretary, while responding to another query, said there was no plan to extend the Emergency Credit Line Guarantee Scheme beyond March 31, as people have stopped making use of the scheme, which is evident from the fact that only Rs 3.6 trillion of Rs 5 trillion has been utilised in the current fiscal year.
[The Business Standard]