Foreign travel and international investing will be taxed higher now

If you are planning to take up an international travel or buy international stocks next year, then you will have to pay higher taxes. How is that?

In this Union Budget 2023, the government has increased the tax collected at source (TCS) on foreign remittances or foreign transactions under the Liberalised Remittance Scheme, which basically administers whatever forex transactions that you are making. This has been raised to 20 percent versus 5 percent earlier.

This new rate is applicable on overseas tour packages, any other remittances but not on medical and education. For them, the earlier rates are applicable. Additionally, earlier the tax was deducted only if transaction amount crossed Rs 7 lakh but now you will have to pay it irrespective of the amount.

Of course, this is TCS, and it can be claimed in your final income tax return.

How is that? Let’s take up two scenarios, if you buy international stocks for Rs 10,000, you will deduct TCS of Rs 2,000. At the time of filing income tax return, if your liability is Rs 2,500, you will only have to pay Rs 500 because you can get credit of the earlier Rs 2,000 on your transaction.

In the same scenario, your final income tax liability is Rs 1,500, individual will receive a refund of Rs 500 because you have deducted a TCS of Rs 2,000.

So, while it is not a payment per se, but it would mean that 20 percent of your funds will be blocked for a long time, till the time you do not file your returns, this has made investors who invest in international stocks a bit unhappy. Some experts say it is also applicable on international payment via debit cards, credit cards and travel card making individuals with high foreign exposure concerned.