Frequently Asked Questions

Tax collected at source (tcs)

What is Tax Collected at Source (TCS)?

Tax Collected at Source (TCS) is an income tax collected on international money transfers falling under the Liberalized Remittance scheme (LRS) given in Section 206C of the Income Tax Act 1961.

When has TCS come into effect?

TCS came into effect from October 1, 2020. However, all international money transfers under LRS made from April 1, 2020 would be considered for applying TCS.

What is Liberalized Remittance Scheme (LRS) of RBI?

LRS is a scheme that allows a resident individual to send money internationally up to USD 250,000 every financial year.

What percentage of TCS is applicable on money transfers?

• A 5% TCS is applicable for all international money transfers under LRS more than INR 7,00,000 in a financial year including educational payments without loans.

• A 0.5% TCS is applicable if a loan is obtained from a financial institute for educational purpose as defined under section 80E. However, YES Bank charges 5% TCS on all international money transfers more than INR 7,00,000 in a financial year, including on a loan obtained from a financial institution for educational purpose.

• Thus, irrespective of the purpose of transfer or the source of funds, TCS is applicable and will be collected and remitted by Yes Bank on all international money transfers exceeding INR 7,00,000 in a financial year under section 260C of the LRS of RBI.

• A 10% TCS is applicable on international money transfers if PAN card is not provided. Please note, Western Union does not process any money transfer without a PAN card.

Who is responsible to collect the TCS?

YES Bank, being the authorized dealer, will collect the TCS at a 5% rate on international money transfers exceeding INR 7,00,000 under section 260C of the Liberalized Remittance Scheme (LRS) of RBI.

On which money transfers, is TCS applicable?

A 5% TCS is applicable on all international money transfers exceeding INR 7,00,000 in a financial year under LRS.

What percentage of TCS is applicable on money transfers for education purpose?

As per current regulations, If the money transfer is for educational purposes through a loan obtained from any financial institution as defined under section 80E, the TCS rate will be reduced to 0.5%. However, this being an online model, as required by Yes Bank, TCS will be charged at flat rate of 5% for transactions across all purposes by Yes Bank. You can claim refunds for TCS paid against the tax payable while filing your income tax returns as per process.

How will the threshold limit of INR 7,00,000 be computed for FY 2020-21?

The TCS is applicable on all international money transfers under LRS from October 1, 2020. However, for tracking the total threshold limit of INR 7,00,000, all international money transfers under LRS made from April 1, 2020 would be considered.

Can I get any tax rebate?

Yes, TCS paid can be adjusted against tax payable by filing the income tax returns (ITR) in India subject to applicable income tax provisions. The TCS remittance from the bank’s side will be reflected in Form 26AS of the Pan card holder.

Can I get the TCS refunded if the money transfer is cancelled or refunded?

Please note that Western Union or YES bank cannot refund the TCS collected and paid to the government. However, you can claim a refund when filing the income tax returns (ITR). For more information, please refer to the outward remittance web section on the YES bank website.

Are there any exemptions from TCS?

Yes, there are the following exemptions from TCS:
• Money transfers sent via Western Union and other YES Bank channels, or international payments via YES Bank debit card less than INR 7,00,000 in a financial year are exempted from TCS.

Is TCS applicable on tax paid income?

The TCS can be set off against the overall liability of the taxpayer. If a parent has already paid tax on their income and is simply paying the same on behalf of their child, the parent can claim a TCS refund by filing the income tax returns (ITR) in India.

Is there any relaxation on TCS rates due to the COVID-19 situation?

No, there is no relaxation on TCS rates due to COVID-19 situation. Therefore, it needs to be collected at a specified rate of 5%.

Some examples to understand how TCS is applicable:

Case 1:

Mr. A made his first international money transfer of INR 5,00,000 in April 2020 – No TCS

Mr. A made his second international money transfer of INR 2,00,000 in June 2020 – No TCS

Mr. A made his third international money transfer of INR 3,00,000 in September 2020 – TCS will be applicable on INR 3,00,000

5 lakhs + 2 lakhs + 3 lakhs = 10 lakhs. As the limit of money transfer of INR 7 lakhs in a financial year is exceeded, a 5% TCS will be applied on INR 3 lakhs.

Case 2:

Mr. B made money transfers of INR 10,00,000 up to September 30, 2020 – No TCS was applied

Mr. B made money transfers of INR 5,00,000 from October 2020 – March 2021 – TCS applied

10 lakhs + 5lakhs = 15 lakhs. In this case, as the threshold limit of INR 7 lakhs in a financial year is already exceeded before October 1, 2020, a 5% TCS will be applied on every money transfer made after October 1, 2020. In this case, on INR 5,00,000.

Case 3:

Mr. C has made a money transfer of USD 20,000 through Western Union on October 5, 2020 towards education fees out of India through his loan borrowed from a bank (qualified loan under Indian Income Tax Act) – TCS applied

– USD 20,000 = INR 14,80,000. In this case, as the threshold limit of INR 7 lakhs in a financial year is exceeded, a 5% TCS will be applied on INR 7,80,000. Though TCS rate is reduced to 0.5% on money transfers for education purpose paid through loans but YES Bank charges the TCS on loan obtained from a financial institute for educational purpose at 5% only.