20% TCS: How Indian Investors Can Save on Investing Abroad?
In the recent Union Budget 2023, our finance minister proposed a 20% TCS (Tax Collection at Source) on all foreign remittances by Indian resident investors, except for education and medical purposes, under the LRS from Jul 1, 2023.
The TCS will apply only to outward remittances (INR converted to Foreign Currencies) and not foreign inward remittances (money sent into India).
How does this hike impact your global investment plans?
Let's say you want to invest in US stocks.
Currently, the bank collects a 5% TCS if you invest more than ₹7 lakhs.
But per the new rule, 20% tax is deducted immediately at source, irrespective of the amount. So here's a comparison of an ₹5 lakhs investment under the current and proposed TCS.
| Current TCS (5% over 7 lakhs) | Proposed TCS (20% upfront) | |
|---|---|---|
| Investment Amount | INR 5,00,000 | INR 5,00,000 |
| TCS deducted | 0 | INR 1,00,000 |
| Amount available for investing | INR 5,00,000 | INR 4,00,000 |
So your ₹1 lakh is blocked under TCS in the new tax.
Yes, you can adjust it against your annual tax filings at the end of the year. But it still is not convenient. Imagine setting aside 20% of your capital every time you invest. It's no fun.
What can you do before Jul 1, 2023?
You can fund your overseas investments & future expenses before the new rule sets in on July 1st. Maximise your foreign remittances under the LRS before the hike.
How can Winvesta’s Multi-Currency Account (MCA) make this better for you?
1. Hold funds while you decide on your investments:
You can transfer & hold funds in your Winvesta MCA in multiple currencies. This gives you time to plan & build your global portfolio optimally.
Ex: You plan to invest in the US equities markets after it's less volatile in a few months. You can transfer the funds to the MCA before July 1st without worrying about the TCS kicking in and hold funds there while waiting for the right opportunity to invest in US stocks.
So, time your investments without worrying about TCS hike
2. Receive and reinvest funds:
Your Winvesta MCA can receive foreign funds from equities sales & other foreign investment gains (real estate, investment in startups etc.) You can reinvest these funds into other foreign opportunities from the MCA without having to repatriate them back to India.
Ex: You receive $10000 from selling your equities. You wish to invest in a startup in the US. You can directly send $10000 from your MCA to the startup account without converting it to INR.
You save on FX & collection fees while not having to fund your global investments from India under the increased TCS hike.
What can you do next?
Under LRS, Indian investors can invest INR 7 lacs in a financial year with 0% TCS.
You can fund INR 7 lacs before 31 March 2023 (FY 22-23). And another INR 7 lacs (FY 23-24) before the 1 July rate hike. So benefit by transferring maximum funds under the current TCS rates.
Visit our website to know more about Winvesta MCA by clicking the link here.
For the uninitiated, here are a few quick references.
💡What is TCS?
Tax Collected at Source (TCS) is a tax a seller or service provider collects from the buyer at the time of sale or service and then deposits with the government.
💡What is LRS?
The LRS (Liberalized Remittance Scheme) allows Indian residents to remit up to US$2,50,000 per financial year. The remittances can be for various purposes, including personal travel, medical treatment, education, a gift to relatives, expenses for close relatives abroad, and purchase of property abroad, among others.
Impact of Budget 2023: TCS on Foreign Remittances under LRS
| Remittance Types | Present TCS | Proposed TCS(from 1 July 2023) |
|---|---|---|
| Education expenses (if a loan is taken from a domestic bank) | 0.5% TCS on the amount exceeding INR 7 lacs | No Impact |
| Education expenses (if not funded through a domestic bank loan) | 5% TCS on the amount exceeding INR 7 lacs | No Impact |
| Medical expenses | 5% TCS on the amount exceeding INR 7 lacs | No Impact |
| Overseas Tour Package | 5% TCS without threshold limit | 20% TCS without threshold limit |
| Investment use-cases (Securities, Properties, Start-up funding) | 5% TCS on the amount exceeding INR 7 lacs | 20% TCS without threshold limit |
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
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In the recent Union Budget 2023, our finance minister proposed a 20% TCS (Tax Collection at Source) on all foreign remittances by Indian resident investors, except for education and medical purposes, under the LRS from Jul 1, 2023.
The TCS will apply only to outward remittances (INR converted to Foreign Currencies) and not foreign inward remittances (money sent into India).
How does this hike impact your global investment plans?
Let's say you want to invest in US stocks.
Currently, the bank collects a 5% TCS if you invest more than ₹7 lakhs.
But per the new rule, 20% tax is deducted immediately at source, irrespective of the amount. So here's a comparison of an ₹5 lakhs investment under the current and proposed TCS.
| Current TCS (5% over 7 lakhs) | Proposed TCS (20% upfront) | |
|---|---|---|
| Investment Amount | INR 5,00,000 | INR 5,00,000 |
| TCS deducted | 0 | INR 1,00,000 |
| Amount available for investing | INR 5,00,000 | INR 4,00,000 |
So your ₹1 lakh is blocked under TCS in the new tax.
Yes, you can adjust it against your annual tax filings at the end of the year. But it still is not convenient. Imagine setting aside 20% of your capital every time you invest. It's no fun.
What can you do before Jul 1, 2023?
You can fund your overseas investments & future expenses before the new rule sets in on July 1st. Maximise your foreign remittances under the LRS before the hike.
How can Winvesta’s Multi-Currency Account (MCA) make this better for you?
1. Hold funds while you decide on your investments:
You can transfer & hold funds in your Winvesta MCA in multiple currencies. This gives you time to plan & build your global portfolio optimally.
Ex: You plan to invest in the US equities markets after it's less volatile in a few months. You can transfer the funds to the MCA before July 1st without worrying about the TCS kicking in and hold funds there while waiting for the right opportunity to invest in US stocks.
So, time your investments without worrying about TCS hike
2. Receive and reinvest funds:
Your Winvesta MCA can receive foreign funds from equities sales & other foreign investment gains (real estate, investment in startups etc.) You can reinvest these funds into other foreign opportunities from the MCA without having to repatriate them back to India.
Ex: You receive $10000 from selling your equities. You wish to invest in a startup in the US. You can directly send $10000 from your MCA to the startup account without converting it to INR.
You save on FX & collection fees while not having to fund your global investments from India under the increased TCS hike.
What can you do next?
Under LRS, Indian investors can invest INR 7 lacs in a financial year with 0% TCS.
You can fund INR 7 lacs before 31 March 2023 (FY 22-23). And another INR 7 lacs (FY 23-24) before the 1 July rate hike. So benefit by transferring maximum funds under the current TCS rates.
Visit our website to know more about Winvesta MCA by clicking the link here.
For the uninitiated, here are a few quick references.
💡What is TCS?
Tax Collected at Source (TCS) is a tax a seller or service provider collects from the buyer at the time of sale or service and then deposits with the government.
💡What is LRS?
The LRS (Liberalized Remittance Scheme) allows Indian residents to remit up to US$2,50,000 per financial year. The remittances can be for various purposes, including personal travel, medical treatment, education, a gift to relatives, expenses for close relatives abroad, and purchase of property abroad, among others.
Impact of Budget 2023: TCS on Foreign Remittances under LRS
| Remittance Types | Present TCS | Proposed TCS(from 1 July 2023) |
|---|---|---|
| Education expenses (if a loan is taken from a domestic bank) | 0.5% TCS on the amount exceeding INR 7 lacs | No Impact |
| Education expenses (if not funded through a domestic bank loan) | 5% TCS on the amount exceeding INR 7 lacs | No Impact |
| Medical expenses | 5% TCS on the amount exceeding INR 7 lacs | No Impact |
| Overseas Tour Package | 5% TCS without threshold limit | 20% TCS without threshold limit |
| Investment use-cases (Securities, Properties, Start-up funding) | 5% TCS on the amount exceeding INR 7 lacs | 20% TCS without threshold limit |
Disclaimer: The views and recommendations made above are those of individual analysts or brokerage companies, and not of Winvesta. We advise investors to check with certified experts before making any investment decisions.
Ready to earn on every trade?
Invest in 11,000+ US stocks & ETFs