Sending money abroad? Here’s how to reclaim your TCS

I want to send money to my son in the US under the Liberalised Remittance Scheme (LRS). I understand that tax collected at source (TCS) has to be paid on each transaction. How can I reclaim this amount?

—Name withheld on request

It is assumed that you qualify as a resident in India, as per the provisions of the Indian foreign exchange regulations, and are remitting funds to your son under the LRS. Such remittance is subjected to tax TCS by the authorized dealers (i.e., the authorised dealer, or AD, bank), as per the applicable provisions of the Income Tax Act.

The TCS amount so collected by the AD bank, is required to be deposited by them to your credit, with the tax authorities along with the necessary reporting compliances. The AD bank is required to issue a TCS certificate to you in Form 27D, which should also reflect in your Form 26AS (annual tax credit statement) and annual information statement (AIS), as downloaded from your income-tax e-filing account).

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You can claim the credit of TCS against your overall tax liability, while computing your advance tax instalments/self-assessment tax liability at the time of filing your income-tax return. The details of the TCS are required to be reported in Schedule Tax Payments of the income-tax return forms.

It may be noted that in case you are a salaried employee, effective 1 October 2024, you may also wish to declare such TCS to your employer in the specified form and manner, who will then consider a credit of the TCS while computing the tax deductible on your monthly salary.

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The finance minister in her recent budget announced that LTCG on capital gains from mutual funds will be tax-exempt up to ₹1.25 lakh in a financial year. I want to understand from which financial year this will be applicable. Kindly clarify. 

—Manoj

As per the Budget on 23 July 2024, now incorporated in the Finance Act 2024, certain amendments were introduced for capital gains. The key amendments with respect to taxation of capital gains on transfer of equity mutual funds (we have assumed that’s your specific query) with effective dates, have been enumerated below.

With respect to gains on transfer of equity shares or equity-oriented mutual funds (EOMF), as defined:

• In case of Long-Term Capital Gain (LTCG) i.e. EOMF held for more than 12 months prior to transfer, the tax-free limit has been increased from ₹1 lakh per year to ₹1.25 lakh per year. This increase is effective for LTCG on transfers made during entire FY25 (1 April 2024 to 31 March 2025) and onwards.

The tax rate on LTCG has been increased from 10% to 12.5% (both without indexation). However, the increased tax rate is applicable only on transfers made on or after 23 July 2024. For transfers during 1 April 2023 to 22 July 2024, earlier tax rate of 10% is applicable.

• Also, in case of short-term capital gain (STCG), the tax rate has been increased from 15% to 20% for transfers made on or after 23 July 2024. For sale during 1 April 2023 to 22 July 2024, earlier tax rate of 15% is applicable.

There were various other amendments with specified effective dates.

Parizad Sirwalla is partner and head, global mobility services, tax, KPMG in India.

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