Education expenses abroad for the purpose of Tax Collected at Source (TCS) will include tuition, food, accommodation, local transport and health services, the Finance Ministry said late on Friday. It has also defined overseas travel package besides explaining the provisions related to remittances for medical and other purposes.
These are parts of guidelines issued by the Ministry for the applicability of TCS on Liberalised Remittance Scheme (LRS) and on purchase of overseas tour program package.
Earlier, on Wednesday, the Ministry deferred the introduction of the new mechanism of higher rates of TCS for certain categories of remittances while putting the inclusion of spending through International Credit Cards abroad under LRS in abeyance. The Ministry has already clarified that the new mechanism of higher rates would not include education and medical; still, some apprehensions were raised.
Now, in order to remove these apprehensions, the guidelines explain what is included in the LRS for education. It has been clarified that remittance for purpose of education would include purchase of tickets of the person undertaking study overseas for commuting between lndia and the overseas destination, tuition and other fees to be paid to the educational institution and other day-to-day expenses required for undertaking such study.
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Further, citing the RBI circular, the guidelines said education-related services such as tuition, food, accommodation, local transport and health services acquired by resident students while residing overseas will be part of education-related remittance. Tuition fee paid for correspondence courses abroad, where the person receiving education does not travel overseas, would also be covered under remittance for education.
There is no TCS in case of expenditure up to ₹7 lakh in a year for education, financed by loans. After this threshold, TCS rate is 0.5 per cent. In case of self-financed remittance, the threshold will be same, but the applicable TCS rate is 5 per cent.
On medical expense, remittance for the purpose of medical treatment will include purchase of tickets of the person to be treated medically overseas (and his attendant) for commuting between India and the overseas destination, his medical expense; and other day-to-day expenses required for such purpose. Here too, citing RBI circular, guidelines say expenses include those other healthcare, food, accommodation and local transport transactions. Also, transactions for health services rendered remotely or onsite (that is, no travel by service recipient is involved) will be part of remittance for medical. This cover services from hospitals, doctors, nurses, paramedical and similar services.
TCS on LRS for medical treatment is NIL for expenses upto ₹7 lakh, but 5 per cent for more than ₹7 lakh.
Overseas Travel Package
The term ‘overseas tour program package’ will not mean just purchase of only international travel ticket or purchase of only hotel accommodation. “To qualify as ‘overseas tour program package’, the package should include at least two of the followings:- (i) international travel ticket, (ii) hotel accommodation (with or without food)/boarding/lodging, (iii) any other expenditure of similar nature or in relation. As on date, the rate of TCS on buying overseas tour program is 5 per cent with threshold. However, from October 01, the rate would be 5 per cent for expenses up to ₹7 lakh and 20 per cent for more than ₹7 lakh.
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Guidelines clarified that in case of purchase of overseas tour program package which is classified under LRS, TCS provision for purchase of overseas tour program package shall apply and not TCS provisions for remittance under LRS. Since, for purchase of overseas tour program package, the threshold of ₹7 lakh for does not apply, TCS is applicable and tax is required to be collected by the seller. “ln this case, the tax shall be required to be collected at 5 per cent since the total amount spent on purchase of overseas tour program package during the financial year is less than ₹7 lakh. The TCS should be made by the seller,” guidelines said.