New TCS Rules Impacting Money Sent Abroad for Education

Starting from October 1, new Tax Collection at Source (TCS) rules will have significant implications for parents supporting their children’s education abroad under the Liberalised Remittance Scheme (LRS). The changes in regulations will require parents to navigate through stringent tax implications, especially when sending money for various expenses related to their child’s education.

The Central government has stipulated that educational remittances, covering expenses such as travel, tuition, and day-to-day living, will not attract a higher TCS rate if they can be explicitly linked to education. To avoid the elevated taxation of 20 percent, parents must provide meticulous documentation demonstrating that the funds sent are strictly for educational purposes.

However, proving the educational purpose can be challenging, particularly for expenses like accommodation. Students living off-campus or in shared housing may encounter difficulties in establishing the educational nature of such expenditures.

To secure a lower TCS rate of 5 percent for remittances exceeding Rs 7 lakh, parents should take certain steps:

Opt for international cards.

Maintain accurate transaction records, using the correct LRS code when sending funds for education.

Be prepared to file for Tax Collection at Source (TCS) when filing income tax returns (ITR).

In summary, the new TCS rules will require parents to provide robust evidence that the money sent abroad is solely for educational purposes to avoid higher taxation rates. This change underscores the importance of meticulous documentation and adherence to the LRS guidelines.

Re-reported from the article originally published in The Times Now English