Higher Threshold For TDS On Remittance

New Delhi: Finance Minister Nirmala Sitharaman on Saturday proposed to increase the threshold of tax collected at source (TCS) on remittances under the RBI’s Liberalized Remittance Scheme to Rs10 lakh from the existing Rs7 lakh to give relief to non-resident Indians (NRIs).

Presenting her eighth straight Budget in the Lok Sabha on Saturday, Sitharaman said: “I also propose to remove TCS on remittances for education purposes, where such remittance is out of a loan taken from a specified financial institution.”

She stated that the threshold to collect TCS on remittances under LRS is proposed to be increased from Rs7 lakh to Rs10 lakh. She also proposed a presumptive taxation regime for non-residents who provide services to a resident company that is establishing or operating an electronics manufacturing facility.

“I further propose to introduce a safe harbour for tax certainty for non-residents who store components for supply to specified electronics manufacturing units,” she said. Commenting on the relief to non-residents, Vishwas Panjiar, Partner, Nangia Andersen LLP, explained that the TCS was essentially a provision to allow collection of tax at the earliest possible time by shifting the burden of the same from the income earner to the person who is providing the income. Over time, TCS/TDS obligations have grown complex and burdensome.

This not only increases compliance costs but also exposes businesses to penalties for delays or errors, tying up working capital and hindering growth, he stated. The industry has long been demanding simplifying and rationalising TDS/TCS provisions. “The proposal to increase thresholds for applicability of various TDS provisions is a welcome relief, though I feel that the threshold should have been raised even more,” he said.