Representations on Tax Collection at Source (TCS) on Liberalised Remittance Scheme (LRS)

Shri Nitin Gupta, I.R.S.

Chairman

Central Board of Direct Taxes

Ministry of Finance, Government of India

North Block

NEW DELHI – 110 001

Dear Sir,

Re : Representations on Tax Collection at Source (TCS) on Liberalised Remittance Scheme (LRS)

This has reference to amendments carried out by Finance Act 2023 effective from 1 July 2023, amendment to Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 on 16 May 2023 and subsequent clarifications and Press Release issued by Finance Ministry on the amendments to LRS and TCS on LRS.

The amendments are intended to address mismatches observed by the Government in foreign spending through LRS and corresponding incomes reported by the payers. However, the amendments – particularly steep increase in TCS rate from 5% to 20% without any threshold limit for non-educational and non-medical remittances – cast a heavy burden on honest taxpayers (especially salaried taxpayers) in terms of cash flow blockage on legitimate expenditure.

In this regard, the Bombay Chamber believes that the appropriate policy response should be to seek out the tax defaulters from information collected by the Government through 5% TCS and quarterly reporting by Authorised Dealers rather than burdening the honest taxpayers with a higher TCS. Hence, the Chamber recommends that the amendment to increase TCS rate from 5% to 20% on LRS may be rolled back. Alternatively, a mechanism may be introduced to restrict the levy to 5% for honest taxpayers who regularly file returns and whose quantum of remittance is supported by declared sources of income.

Furthermore, to relieve cash flow blockage, salaried employees may be enabled to declare the TCS suffered by them to their employer to reduce the salary tax withholding to that extent.

There are also some further issues regarding classification of expenditure incurred through international credit cards which require clarity from RBI/Finance Ministry.

A detailed representation on the above is attached herewith for your kind consideration.

We request you to consider the above representations favourably in order to foster the government’s agenda of ‘Ease of Doing Business’. If any further details are needed, we will be happy to discuss and elaborate on our suggestions.

Thanking you