LRS Tcs

Great question, Rajkumar!

About TCS on foreign remittance under LRS (Liberalized Remittance Scheme):

• TCS (Tax Collected at Source) is applicable on foreign remittances made by individuals under LRS.

• As per the Finance Act 2020 (effective Oct 1, 2020), when an individual buys foreign currency for overseas travel or expenses, TCS @ 5% is applicable if the amount exceeds ₹7 lakh in a financial year.

• This TCS is collected by the authorised dealer (bank/forex agent) at the time of sale of foreign currency.

Now, your scenario:

• Employee travels abroad and incurs lodging, travel expenses in foreign currency.

• Employee buys foreign currency from a forex agent (authorised dealer).

Is TCS applicable?

• Yes, if the forex agent is an authorised dealer and the total amount of foreign currency bought by the employee exceeds ₹7 lakh in a financial year, then TCS @ 5% is applicable on the amount above ₹7 lakh.

• The company itself is not liable to deduct TCS here because the remittance is done by the individual (employee).

• The forex agent will collect the TCS from the employee.

Summary:

• TCS under LRS applies on purchase of foreign currency by individuals.

• It is collected by the forex agent or bank (authorised dealer), not by your company.

• Your company need not deduct or collect TCS on employee foreign travel expenses reimbursed.

• Employee can claim credit of TCS while filing income tax return.