Budget 2023: TCS Threshold Raised to Rs 10 Lakh

New Delhi, Feb 1 (PTI) 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 Rs 10 lakh from the existing Rs 7 lakh to give relief to non-resident Indians.

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 Rs 7 lakh to Rs 10 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.

The proposal to double the tax-free interest income limit for senior citizens is a forward-thinking move that would enhance the financial security of the elderly, he said.

Similarly, he said that raising the TDS threshold for rental from an annual limit of Rs 2.40 lakh to now a monthly limit of Rs 50,000 per month is a welcome step in alleviating the compliance burden for tenants.

Another standout change is the increase in the TCS exemption for remittances under the Liberalised Remittance Scheme (LRS), directly benefiting individuals making significant cross-border transactions, especially for education or investment purposes, he said.

The removal of TCS on education loans further lightens the financial load on students and their families, easing access to educational financing, he stated.

Moreover, he said that omission of TCS on sale of goods on which TDS is otherwise applicable is a welcome announcement and will mitigate unnecessary litigation.