Report Wire

Tag: Liberalised Remittance Scheme

  • TCS levy: Govt broadcasts 3-month extension for implementing revised charges

    The finance ministry issued a notification on Wednesday by which it stated that the elevated TCS charges will come into impact from 1 October this 12 months giving an extension of three months as the sooner notification stated that the elevated charges shall be relevant from 1 July this 12 months.  

    The finance ministry additionally determined to present extra time for the implementation of the revised TCS charges and for the inclusion of bank card funds in LRS. This would imply that transactions by International Credit Cards whereas being abroad wouldn’t be counted as LRS and therefore wouldn’t be topic to TCS in accordance with the assertion by the Finance Ministry.

    The Union Government within the Budget this 12 months introduced sure modifications to the system of Tax Collection at Source (TCS) on funds underneath the Liberalised Remittance Scheme (LRS) and on abroad tour program packages. These had been to take impact from 1 July 2023 which now has been prolonged until 1 october 2023. It was additionally introduced in March that bank card funds can be introduced underneath the LRS. Numerous feedback and recommendations had been acquired which have been fastidiously thought-about.

    “In response to the feedback and recommendations it has been determined to make appropriate modifications. Firstly, it has been determined that there shall be no change within the fee of TCS for all functions underneath LRS and for abroad journey tour packages, no matter mode of fee, for quantities as much as Rs. 7 lakh per particular person every year. It has additionally been determined to present extra time for the implementation of the revised TCS charges and for inclusion of bank card funds in LRS,” the finance ministry assertion stated.

    Overseas bills on bank cards exceeding ₹7 lakh shall be topic to a 20 per cent TCS. However, if such bills is incurred for medical or academic function, the TCS can be levied at 5 per cent. For these availing loans for abroad schooling, a decrease TCS fee of 0.5 pr cent can be levied above the ₹7-lakh threshold.

    Earlier and new TCS charges are summarised as underneath:

    View Full Image

    Earlier and new TCS charges are summarised as underneath:

    Overseas spending utilizing bank cards to not entice TCS

    The authorities on Wednesday stated abroad spending utilizing worldwide bank cards won’t be included underneath the Liberalised Remittance Scheme (LRS) and therefore, wouldn’t entice TCS.

    Also, the implementation of a better fee of tax collected at supply (TCS) of 20 per cent on abroad remittances underneath LRS, like tour bills, has been deferred by three months and can come into impact from October 1.

    However, Credit card spending abroad won’t entice TCS from October 1.

    The increased TCS fee shall be relevant solely when the LRS funds exceed the brink of ₹7 lakh.

    The Union Budget 2023-24 had hiked TCS charges to twenty per cent, from 5 per cent at present, on abroad tour packages and funds remitted underneath LRS (apart from for schooling and medical functions). The new tax charges will come into impact from July 1, 2023.

    For the acquisition of an abroad tour programme package deal, the TCS shall proceed to use on the fee of 5 per cent for the primary ₹7 lakhs per particular person every year; the 20 per cent fee will solely apply for expenditure above this restrict, the ministry added.

    In May, the federal government introduced modifications to the FEMA Current Account Transaction Rules and included abroad bank card bills within the ambit of LRS (Liberalised Remittance Scheme), underneath which a resident can remit cash overseas as much as a most of USD 2.50 lakh every year. Beyond the brink, RBI approval can be required.

     

     

     

    Catch all of the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
    Download The Mint News App to get Daily Market Updates.

    More
    Less

    Updated: 28 Jun 2023, 09:26 PM IST

  • How to ship money to your grownup youngsters dwelling abroad

    I’ve a son (17) and daughter (21). Mu daughter plans to go abroad for two years. I’ve two queries: i) How lots money can I ship her in a 12 months, and should it is every month or does it needs to be yearly? ii) I’ve created a private perception for the benefit of my youngsters. Can I ship the money by the use of a private perception?

    —Name withheld on request

    The Liberalised Remittance Scheme (LRS) is in the marketplace to all resident individuals in India to remit as a lot as $250,000 per fiscal 12 months. There is not any restriction on the frequency of remittances beneath LRS. That talked about, the mix amount in a single financial 12 months mustn’t exceed $250,000. Furthermore, from 1 July, tax assortment at provide (TCS) on the LRS will enhance from 5% to twenty% for remittances. Therefore, you presumably can ship money to your daughter every month as long as it is inside this annual limit. Note: on the time of remitting the portions, the authorised vendor monetary establishment would require you to undertake certain compliances resembling price of 20% TCS and submission of type A2, beneath which the character of transaction must be declared by you.

    Regarding your second query: You have created a private perception and search to remit funds from the assumption’s account. But, LRS is not obtainable to trusts. Hence, you may must remit the funds out of your checking account, and by no means from the account of the assumption.

    My son is an NRI dwelling in Germany. He would not plan to return once more, and commenced his private enterprise there. I have to current him a portion of my monetary financial savings. Can I change a lump-sum amount from my monetary financial savings account to his overseas checking account as a gift?

    —Name withheld on request

    LRS permits a resident specific individual to make a rupee current to an NRI shut relative (a ‘relative’ is as outlined as beneath the Companies Act, 2013) of the resident specific individual by way of crossed cheque or digital change. Your son is regarded as your relative beneath the Companies Act, 2013, and subsequently, you presumably can change by way of a gift a lump-sum amount out of your monetary financial savings account in India to his overseas account.

    However, do observe that such current amount must be all through the edge of $250,000 per financial 12 months as permitted for a resident specific individual beneath the LRS. Considering that with affect from 1 July , the TCS on all remittances beneath LRS shall be elevated from 5% to twenty%, it would doubtless be worthwhile to challenge inside the exact amount to be gifted on the concept of the additional cash outflow in route of TCS.

    Rishabh Shroff is companion & co-head private shopper, Cyril Amarchand Mangaldas.

    Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
    Download The Mint News App to get Daily Market Updates.

    More
    Less

    Updated: 30 May 2023, 11:24 PM IST

    Topics

  • How so much money can mom and father ship to youngsters Abroad?

    India had restricted abroad alternate reserves post-independence. Post-liberalisation modified this, India solidified its place inside the worldwide market, and capital stream all through the globe turned very important for monetary growth. Soon, the Reserve Bank of India (RBI) launched the Liberalised Remittance Scheme (LRS) in 2004. LRS is a scheme that permits residents to remit money outside India. The scheme permits Indians to ship as a lot as $250,000 in a financial yr with none approval from the RBI, equipped the transaction is not going to be prohibited, and the amount is all through the prescribed prohibit. Examples of permissible transactions are: better coaching in abroad universities, medical treatment abroad, maintenance of shut relations staying outside of India, investments in securities abroad, emigration, going abroad for employment, and lots of others. Remittance is prohibited for purchase of lottery tickets/sweep stakes, remittances for the acquisition of abroad international cash convertible bonds issued by Indian corporations inside the overseas secondary market and remittance for getting and promoting in abroad alternate abroad.

    There has been an increase inside the number of school college students flying abroad to pursue better coaching yearly. According to the coaching ministry, there was a 68% rise in school college students going abroad in 2022. India recorded a six-year extreme with 750,365 school college students shifting abroad, an infinite bounce from 444,553 in 2021.

    With so many school college students shifting abroad, LRS permits mom and father to ship money abroad and spend cash on abroad securities. An RBI report revealed that folk despatched $4,991 million to their children abroad to cowl coaching costs in 2019-20. The numbers declined to $3836 million as a consequence of covid-19 in 2020-21 and rose as soon as extra in 2021-22 to $5165 million. The amount has elevated drastically inside the ultimate 10 years. Parents spent solely $ 114 million in 2011-12 for coaching abroad.

    The coaching payments embody tuition prices and residing payments. It must be well-known that an amount of $250,000 is related for all transactions put collectively and by no means individually for tuition prices and lodging. However, the resident can draw the amount in further of the prescribed prohibit of $250,000 whether or not it’s required by the faculty. In that case, documentary proof, paying homage to an estimate of tuition prices from the faculty, may very well be required.

    Another mandatory difficulty of LRS is the flexibleness to spend cash on abroad securities for coaching abroad. Parents could make investments money inside the US market and save in {{dollars}} to easily afford abroad tuition prices ultimately. Investing abroad can provide them a major revenue as they will not lose their monetary financial savings as a consequence of international cash depreciation, which might be the case within the occasion that they save in INR.

    Data from RBI reveals an increase inside the amount Indians make investments abroad by means of LRS inside the present earlier. Investment in equities and debt reached $747 million in 2021-22 from $472 million in 2020-21. It moreover revealed Indians invested solely $195 million in 2014-15.

    Do discover that any additional remittance in further of $250,000 is perhaps made with the prior approval of RBI. The explicit individual ought to have PAN to remit money outside India. The remittance may be made in any freely convertible abroad international cash.

    The Union worth vary hiked tax assortment at provide (TCS) for abroad remittances beneath LRS, and the proposed modifications will seemingly be environment friendly from 1 July. As per the proposed modifications, no tax will seemingly be deducted if the remittance for coaching or medical payments is decrease than ₹7 lakh, 5% tax will seemingly be deducted on the exceeded amount if the amount of remittance for the same exceeds ₹7 lakh and any remittance for coaching abroad by the use of an coaching mortgage will enchantment to a TCS of 0.5% for the amount in further of ₹7 lakh.

    LRS is perhaps an environment friendly scheme for folk to help their children all through their analysis abroad stint. Parents might reap the advantages of LRS by investing inside the US market to fulfil their teen’s abroad coaching needs.

    Eela Dubey is co-founder of EduFund

    Catch all the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
    Download The Mint News App to get Daily Market Updates.

    More
    Less

    Topics

  • Want to ship cash overseas? Know the advantages of LRS

    If you have got a toddler learning overseas or if you’re planning an abroad vacation, then the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI) applies to you.

    Under LRS, all resident people, together with minors, can remit as much as $2,50,000 per monetary yr for any permissible transaction. There are not any restrictions on the frequency of remittances, and in addition no transaction-specific sub-limits below LRS.

    Among the permitted transactions for which international change could be remitted, are non-public journey (besides to Nepal and Bhutan), journey for enterprise or medical remedy, items or donations, upkeep of shut relations overseas, research, and abroad investments. On the opposite hand, prohibited transactions embrace remitting cash for buy of lottery tickets, for margin calls to abroad exchanges / counterparties, and for buy of belongings in international locations recognized as non-cooperative by the Financial Action Task Force.

    “Certain transactions are prohibited below regulation, and the identical restrictions have been integrated even below the LRS,” says Neeraj Agarwala, partner, Nangia Andersen India.

    To be able to remit money, the individual must have a valid PAN and should be able to provide adequate documents to prove the genuineness of the transaction, says Agarwala.

    As for investments made abroad, he says, “Investing in the shares of a private company is permitted under the LRS. But one needs to ensure that they comply with the ODI (overseas direct investment) guidelines. So, the monetary limit comes from the LRS, and the compliances and other regulations come in from the ODI scheme.”

    While the LRS restrict applies at a person degree, relations can membership collectively their permissible limits. Agarwala says RBI has now particularly permitted pooling of funds for the acquisition of immovable property exterior India. “So, if I buy a property for $4,00,000, then I can remit $2,50,000 and the stability could be remitted by my spouse. After the latest modification, she needn’t be a co-owner within the property.”

    RBI information on LRS exhibits ‘maintenance of relatives’ and ‘gifts’ among the many prime spend classes after journey and research overseas.

    According to Agarwala, for the aim of LRS, the identical definition of relative as below the Companies Act, 2013, is relevant. This contains father, mom, partner, siblings, and many others. “In absence of any particular directions on what is roofed below ‘maintenance’, this could usually imply the price of lodging, journey, medical and training bills of shut relations.”

    Again, ‘gift’ has not been defined. “So, any money transferred out of love and affection, and not as consideration for any services received would qualify as a gift,” provides Agarwala.

    Catch all of the Business News, Market News, Breaking News Events and Latest News Updates on Live Mint.
    Download The Mint News App to get Daily Market Updates.

    More
    Less

    Subscribe to Mint Newsletters

    * Enter a sound electronic mail

    * Thank you for subscribing to our publication.

  • FY22: As Covid curbs ease, outward remittances up 55% to all-time excessive

    Foreign change, together with the US greenback and euro, taken overseas by resident Indians has shot up by 54.60 per cent in the course of the fiscal ended March 2022 as international locations opened up and flight providers resumed after the Covid-19 pandemic restricted the motion of resident Indians within the earlier 12 months.

    Total outward remittances underneath the Reserve Bank of India’s (RBI) Liberalised Remittance Scheme (LRS), shot as much as an all-time excessive of $19.610 billion within the 12 months ended March 2022 as towards $12.684 billion in March 2021, as per newest RBI knowledge. Remittances in FY22 have overtaken the determine of $18.75 billion recorded in 2019-20 earlier than the pandemic ravaged the globe.

    Under the journey class, the foreign exchange outgo greater than doubled to $6.909 billion in 2021-22 as towards $3.239 billion within the earlier 12 months. The rise was primarily because of the lifting of journey restrictions after the pandemic subsided within the final a number of months, resulting in resumption of flight providers to most international locations and elimination of visa curbs by nations.

    Remittances for research overseas elevated to $5.165 billion from $3.836 billion the earlier 12 months as overseas universities restarted offline courses and college students began getting visa for research. Investments in abroad fairness and debt by Indians additionally shot as much as $746.5 million in FY22 as towards $471.80 million within the earlier 12 months. Remittances as present rose to $2.336 billion from $1.586 billion a 12 months in the past.

    The RBI has been growing the restrict for remittances following the rise in overseas change reserves. In February 2015, with overseas change reserves touching file ranges, RBI doubled the annual abroad funding ceiling for people to $250,000 underneath the LRS.

    In the wake of the worsening present account deficit and a unstable rupee, the RBI had in August 2013 diminished the ceiling from $200,000 to $75,000 per particular person in a 12 months underneath the LRS.

    Consequently, with enchancment within the foreign exchange state of affairs, it was raised to $1,25,000 in June 2014. The LRS permits residents to accumulate and maintain shares, debt devices or different belongings outdoors India with out prior approval of the RBI. Under the LRS, all resident people, together with minors, are allowed to freely remit as much as $250,000 per monetary 12 months (April-March) for any permissible present or capital account transaction or a mix of each. The scheme was launched on February 4, 2004, with a restrict of $25,000.

    Buy Now | Our greatest subscription plan now has a particular worth

    The LRS restrict was revised in phases in line with prevailing macro and micro financial situations.

    Many banks permit worldwide remittance as much as $25,000 on-line, with out having to go to the department. Investing within the US inventory market has seen growing curiosity from retail buyers in current occasions due to the excessive returns.

    As per the Finance Act, 2020, tax collected at supply (TCS) at 5 per cent is relevant on combination foreign exchange transactions underneath LRS exceeding Rs 7 lakh in a monetary 12 months.

    Meanwhile, overseas change reserves declined by $2.69 billion to $597.72 billion in the course of the week ended April 29. With this fall, foreign exchange reserves have fallen $44.73 billion from $642.45 billion recorded on September 3, 2021, in accordance with RBI knowledge.

  • Remittance amenities obtainable to resident Indians and non-resident Indians

    I’m confused between facility of remittance by a resident Indian upto for $2,50,000 with none questions and remittance from NRO account for schooling or property sale? 

    The schemes which you’re speaking about are two completely different schemes relevant to completely different set of individuals. The first scheme is Liberalised Remittance Scheme (LRS) which is out there to individuals who’re resident of India underneath the provisions of Foreign Exchange Management Act, (FEMA).  Under LRS a resident Indian together with a minor is allowed to remit as much as $2.50 lakh yearly for permitted functions. The permitted functions embrace travelling overseas, items, donations, migration, schooling and medical bills of self and family members and so on. This facility can be used for making investments outdoors India together with shopping for property and fairness merchandise outdoors India. 

    The different facility which you’re speaking about remittances from NRO account is out there to individuals who’re Non-Resident Indians (NRI) underneath the provisions of FEMA. This facility is out there to Indian citizen residing overseas in addition to to the individuals of Indian Origin as outlined underneath the FEMA guidelines. These individuals are allowed to remit upto $10 lakh yearly from India. 

    Since balances in NRE and FCNR account are totally repatriable with none restrict, the annual restrict of 10 Lakhs USD applies solely to remittances from NRO account of the NRIs. 

    In addition to this facility of annual remittance upto $10 lakh yearly NRIs are allowed to remit sale consideration in respect of two resident home throughout their life time.

    Balwant Jain is a tax and funding knowledgeable and may reached on [email protected] and @jainbalwant on Twitter.

    Subscribe to Mint Newsletters

    * Enter a sound e-mail

    * Thank you for subscribing to our publication.

    Download
    the App to get 14 days of limitless entry to Mint Premium completely free!

  • Education to journey, outward remittance in Aug all-time excessive

    WITH ADMISSIONS to overseas universities again in favour after a year-long lull, together with regular normalisation in overseas journey and rise in financial exercise, month-to-month outward remittances underneath the Liberalised Remittance Scheme (LRS) hit an all-time excessive of $1.96 billion in August, based on knowledge launched by the Reserve Bank of India.
    The earlier excessive was $1.87 billion in August 2019. This August, the information present, remittances on account of “study abroad” additionally amounted to an all-time month-to-month excessive of $780 million.
    Remittances for journey, too, hit a 18-month excessive of $574 million — the best since February 2020, when a number of nations began imposing flight and journey restrictions following the Covid outbreak. This August additionally witnessed remittances of $284.8 million for the aim of “maintenance” of shut kinfolk in August 2021.
    Experts say that historically August witnesses excessive outward remittance as universities abroad begin their new session in September and college students remit funds for payment, accomodation, tickets and different set-up prices.
    Arijit Sanyal, MD and CEO, HDFC Credila Financial Services, stated the organisation noticed an enormous rise in disbursements throughout the month. “Last year, the demand had gone down because of Covid lockdowns. So this year there has been a bunching-up of demand, which has led to the rise. Also, there are new geographies that students are going to and that has led to a higher number of students going out,” he stated.

    According to Sanyal, whereas the US continues to get the most important share of scholars, Canada and the UK have grow to be larger markets and there are “many other new places where more and more students are going for education”.

    Experts say extra Indian college students have been in a position to receive admissions abroad due to two elements: a number of universities have added capability following the evolution of a hybrid mode of training supply and Indian college students have elevated their share due to their competitiveness.
    Experts in training consulting enterprise say that between March and August final 12 months, there was uncertainty round how lengthy Covid would stick with no breakthrough on vaccinations.
    “As a result, many students did not take admissions in foreign universities. This year, the numbers have grown significantly as there is much more clarity on vaccinations and the protection it offers,” stated a senior official with a number one abroad training advisor in Hyderabad.
    “The number of students going abroad is growing every year and the trend remains constant except for a blip last year on account of Covid,” the official stated.
    With the report outward remittances in August, the entire within the first 5 months of the present monetary 12 months has now reached $6.94 billion. In comparability, remittances within the corresponding five-month interval of final monetary 12 months, which was hit arduous by Covid, amounted to $4.05 billion. For the complete 12 months FY’21, it amounted to $12.68 billion.
    The 12 months 2019-20 had witnessed the best outward remittances of $18.76 billion in any monetary 12 months since LRS was launched in 2004.
    India has witnessed a pointy surge in remittances over the past seven years. While outward remittances underneath LRS amounted to $1.325 billion within the monetary 12 months 2014-15, it jumped to 4.6 billion in 2015-16 and over the subsequent few years rose to $18.76 billion in 2019-20.

    Aggregate outward remittances underneath LRS since April 2014 amounted to $77.6 billion. While almost $20 billion have been remitted for “study abroad”, over $24 billion have been remitted for journey functions.
    Under the LRS, resident people are allowed to remit as much as $250,000 in a monetary 12 months underneath numerous heads, together with present account transactions akin to going abroad on employment, research, journey, emigration, upkeep of shut kinfolk, and medical therapy.
    Residents may switch cash for capital account transactions underneath LRS, together with opening of overseas forex financial institution accounts abroad, buy of property and making investments in items of mutual funds, and enterprise capital funds.

  • Unlocks loosen purse strings: Outward foreign exchange remittances bounce again in Q1

    The outflow of international alternate underneath the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India (RBI) has bounced again within the first quarter ended June 30, 2021 after a steep fall throughout the year-ago interval when the Covid pandemic hit nations internationally and journey was banned.
    With the unlocking and fall in Covid instances in lots of nations, remittances from India rose to $3.67 billion within the April-June interval of 2021-22 as towards $1.89 billion a 12 months in the past. Under the Liberalised Remittance Scheme of the RBI, all resident people, together with minors, are allowed to freely remit as much as $250,000 per monetary 12 months (April–March) for any permissible present or capital account transaction or a mixture of each.
    Total outward remittances elevated to $1.232 billion in June this 12 months, as towards $780 million in June final 12 months, in line with the most recent RBI information. Outflows had been $1.188 billion in April and $1.250 billion in May. With Covid changing into a dampener, outward remittances fell by over $six billion to $12.684 billion in fiscal ended March 2021 from $18.76 billion in March 2020.

    Currently, residents are allowed to remit cash overseas for numerous functions like personal visits to any nation (besides Nepal and Bhutan), present or donation, going overseas for employment, emigration, upkeep of shut family overseas, journey for enterprise or attending a convention or specialised coaching or for assembly bills for assembly medical bills, check-up overseas, accompanying as attendant to a affected person going overseas for medical therapy, bills in reference to medical therapy overseas and research overseas.
    According to RBI information, outward remittances for research overseas had shot up from $431 million in April-June 2020-21 to $1.162 billion in April-June of 2021-22. Residents who travelled overseas had remitted $855 million within the first quarter of 2021-22, up from $473 million in the identical interval a 12 months in the past. Similarly, remittances for upkeep of shut family overseas had elevated from $483 million a 12 months in the past to $718 million in first quarter of 2021-22.

    In fiscal 2020-21, complete remittances for journey overseas had plummeted to $3.23 billion from $6.95 billion in 2019-20 as nations cancelled flights and banned entry of travellers. The present indication is that journey overseas is slowly selecting up with unlocks introduced by many nations. However, many nations together with the US, Canada and Australia are but to permit Indian vacationers.
    Investments in fairness and debt overseas by resident Indians jumped to $170 million in April-June of 2021-22 as towards $83 million in the identical interval of final 12 months. The RBI has not prescribed any scores or tips underneath LRS of $2,50,000 on the standard of the funding a person could make. However, the person investor is anticipated to train due diligence whereas taking a call relating to the investments which she or he proposes to make.
    The RBI doesn’t permit remittance from India for margins or margin calls to abroad exchanges or abroad counterparty and for buy of FCCBs issued by Indian firms within the abroad secondary market. Remittance for buying and selling in international alternate overseas can be not allowed.
    what’s LRS?
    Under the Liberalised Remittance Scheme of the RBI, all resident people, together with minors, are allowed to freely remit as much as $250,000 per monetary 12 months (April-March) for any permissible present or capital account transaction or a mixture of each.

  • When a relative overseas repays mortgage, foreign exchange positive factors are usually not taxable

    Sometimes, taxpayers can land in a novel scenario. They might make some financial positive factors that aren’t specified underneath revenue tax legal guidelines. In such circumstances, the taxation will depend on the interpretation of the provisions underneath the I-T Act. One prevalent instance of that is how bitcoins generated through the “mining” course of might be taxed. There are completely different views on this as it isn’t lined underneath tax legal guidelines.

    In such uncommon and distinctive conditions, the assessee might take the view that the positive factors are usually not taxable as they don’t seem to be lined underneath any I-T rules. The assessing officer, nonetheless, will have a look at it as a income loss for the federal government. Officers normally attempt to tax such positive factors.

    Let’s have a look at one other instance. Suppose you give a $100,000 private mortgage to a relative staying overseas with out charging any curiosity. Say, the change charge was ₹70 for a greenback. The lender might want to switch ₹70 lakh from India. The borrower repays the cash after some years. At the time of compensation, the rupee weakens towards the greenback. Say, it’s ₹76 for a greenback. When the borrower transfers $100,000, the lender will obtain ₹76 lakh. Due to the change charge distinction, the lender makes ₹6 lakh further. There is not any provision underneath the I-T Act for such positive factors.

    The Income Tax Appellate Tribunal (ITAT), Mumbai, not too long ago handled the same case. It held that positive factors arising as a result of foreign exchange fluctuation when receiving compensation of a private mortgage is not going to be taxable.

    During an evaluation, a tax officer observed that a person had obtained ₹1.12 crore. The taxpayer defined that he had prolonged an interest-free private mortgage to his cousin in Singapore. The remittance was made underneath the Liberalised Remittance Scheme (LRS) of the Reserve Bank of India.

    Due to a change within the change charge, the quantity obtained on compensation was greater than the cash superior initially. The taxpayer stated that the mortgage was purely private—it was not within the nature of a enterprise transaction. There was no motive for financial positive factors on this transaction. The assessing officer, nonetheless, opined that the positive factors have been taxable and made additions to the revenue, classifying them as curiosity revenue.

    “The Mumbai ITAT held that the cash that the assessee had obtained couldn’t be taxed as revenue until it’s a income receipt, or there are provisions to tax it underneath the legislation,” stated Naveen Wadhwa, a chartered accountant and deputy common supervisor at Taxmann.com, a number one writer on taxation and company legal guidelines.

    The ITAT dominated in favour of the taxpayer, saying positive factors as a result of forex fluctuation on this occasion shouldn’t be taxed.

    Subscribe to Mint Newsletters * Enter a legitimate e-mail * Thank you for subscribing to our publication.

    Never miss a narrative! Stay related and knowledgeable with Mint.
    Download
    our App Now!!

  • The onus of bearing TDS is on the NRI vendor

    I’m a resident of India and I wish to ship some cash to my son, who’s an NRI. How a lot cash can I ship in a 12 months and what would be the tax implications?

    —Name withheld on request

    Residents of India are allowed to remit as much as $250,000 below the Liberalised Remittance Scheme (LRS) in a monetary 12 months. This remittance could also be used for medical remedy, journey, schooling, upkeep of shut kinfolk or presents, and many others. Effective 1 October 2020, tax is collected at supply (TCS) @ 5% on all remittances below the scheme which are above ₹7 lakh. In case you don’t present PAN to the licensed seller, TCS shall be deducted @ 10%. TCS shall apply on the quantity that’s in extra of ₹7 lakh. TCS may be adjusted in opposition to your last tax due on the time of submitting your revenue tax return in India.

    My good friend has a share in some household property in Delhi bought by his father. My good friend has three brothers. Two of them are Canadian residents and the opposite is an Indian citizen. Now, they’re promoting the property by a common energy of lawyer given to the Indian brother. The purchaser’s chartered accountant is saying that he’ll lower 10% TDS from the shares of all of the homeowners. The whole price of the property is roughly ₹1 crore. What is the treatment?

    —Name withheld on request

    Usually, a common energy of lawyer is issued by an NRI for the sale of a property since he/she can’t be personally current in India. It helps them assign their duty to a reliable particular person. However, in case of property sale transactions, though an influence of lawyer has been issued, the onus of bearing TDS on the transaction stays on the NRI vendor. Also, notice that the speed for TDS deduction shall be 20% (extra cess and surcharge as relevant) on this case. If the NRI sellers plan to reinvest the capital features and subsequently shouldn’t have any tax dues, they could search a certificates from the related revenue tax officer for TDS deduction at nil fee or a decrease fee.

    Archit Gupta is founder and CEO, ClearTax.

    Subscribe to Mint Newsletters * Enter a legitimate e mail * Thank you for subscribing to our publication.