How to claim TCS refund when traveling abroad and filing a return

If you travel overseas, be prepared to pay an upfront 20 per cent tax collected at source for your foreign tour packages or the currency you want to exchange for your travels. However, you need not fret about this additional burden as TCS isn’t an additional tax. You can adjust it against your total income tax liability or claim it back while filing income tax returns (ITR).

TCS is a tax collected by sellers when certain high-value transactions occur, and a refund may be available in specific circumstances.

For example: f the amount of tour package/forex purchase/forex remitted out of India exceeds Rs 7 lakh, TCS will be charged at 20% rate.If you want to convert Rs 3 lakh to Singapore Dollars after exhausting the Rs 7 lakh limit for your overseas travel, your bank will deduct 20 per cent TCS on the Rs 3 lakh, which means you will be shelling out an extra Rs 60,000. The bank will provide you with a TCS certificate at the time of deduction, which can be used for claiming TCS in your ITR filing. 

Example two explained by Bookmyforex: Let’s assume you want to purchase forex worth Rs 8,00,000 in the form of a forex card. As per the new proposed rate, starting Oct 1, 2023, you will be charged 20% TCS over a threshold of INR 7 lakhs. In this case, you will be subject to 20% TCS on (Rs 8 lakhs – 7 lakhs) = 1 lakh which will be {(1,00,000)*(20/100)}=Rs 20,000. As a result, you would end up paying a total amount of Rs 2,20,000 at the time of placing your Forex order. Now, let us assume that someone buys forex worth Rs 2 lakhs during a financial year. In this case, there is no Tax Collected at Source (TCS) applicable to this Forex transaction.

"If your purchase of Rs 3 lakh forex is first tranche in the total of Rs 7 lakh in that year then no TCS will apply.But if you have utilised this limit in some other remittances in that year, then calculate the balance left. If still any buffer left within Rs 7 lakh, then  no TCS , but if it crosses, there will be a TCS deduction of 20 per cent," said Ritika Nayyar, Partner, Singhania & Co.

The money deducted as TCS can be adjusted against your overall tax liability. TCS can be claimed as an income tax refund or a credit when filing for returns.
 

How to claim a TCS refund on LRS while filing an ITR
 

To claim a refund for Tax Collection at Source on remittances made under the Liberalized Remittance Scheme (LRS) while filing one’s income tax returns, one first needs to gather all necessary documents, including Form 26AS detailing the TCS amount collected. When filing a tax return, one must declare the remittance as income in the appropriate section, such as "Income from Other Sources" or "Exempt Income,". 

"One can claim an exemption or deduction, if applicable, based on specific rules and provisions. One must calculate their total tax liability, considering any exemptions or deductions followed by reporting the TCS amount collected in the "Tax Credits" section. If the TCS amount exceeds one’s tax liability, one can request a refund through the return filing process. After filing, follow up with tax authorities to ensure the refund processing and receipt of the excess TCS amount is necessary," said Sandeep Bajaj, Advocate, Supreme Court of India.

One must check one’s Form 26AS to ensure that the TCS amount is the same as collected at the time of remittance. Further, obtain the TCS certificate from the Authorised Dealer (bank) / seller of package tour programmes to claim the same.

"One must claim credit of TCS while filing the ITR of the relevant Assessment Year, under the specified sections in his/her ITR form and providing the details desired. This credit shall reduce the final tax liability or shall be partly /totally refunded if the amount of TCS claim is more than the final tax liability for the Assessment year," said Ritika Nayyar, Partner, Singhania and Co. 

What if I am claiming the TCS as a Hindu Undivided Family ( HUF) 

Claiming a Tax Collection at Source (TCS) refund when travelling abroad and filing a return as a Hindu Undivided Family (HUF) in India involves a few steps.  Ankit Rajgarhia, Principal Associate, Karanjawala & Company, Advocates, explains in detail:

1. Gather Necessary Documents: Ensure you have all the documents related to the TCS transaction, like the TCS certificate or Form 27D issued by the seller, along with your PAN card and proof of the transaction (like the invoice).

2. File Income Tax Return: As an HUF, you need to file an income tax return in India. You can do this online through the Income Tax Department's e-filing portal.

3. Claim TCS Refund: In your income tax return, you can claim a refund for the TCS paid. Provide the details of the TCS transaction, including the amount, the seller's PAN, and the TCS certificate details.

4. Calculate and Verify the Refund: Ensure that you've calculated the refund accurately. The refund amount should match the TCS amount you paid.

5. Submit Your Return: After entering all the required information, submit your return online. The income tax department will process your return and verify the TCS refund claim.

6. Monitoring the Refund Status: You can check the status of your refund by logging into the Income Tax e-filing portal or contacting the Income Tax Department.

7. Receive the Refund: Once your return is processed and the TCS refund is approved, the refund amount will be credited to your bank account. Ensure that you have provided accurate bank details in your return.

8.  Keep Records: It's essential to keep all relevant documents, including your income tax return, TCS certificate, and transaction records, for future reference.

Implications of Filing as HUF:

Filing income tax returns as a Hindu Undivided Family (HUF) in India comes with specific implications:

1. Tax Rate: HUFs are taxed at the same rates as individuals. The income of the HUF is taxable, and it is treated as a separate entity for tax purposes.

2. Exemptions and Deductions: HUFs are eligible for exemptions and deductions under the Income Tax Act, similar to individual taxpayers.

3. Clubbing Provisions: Certain income may be clubbed with the income of the Karta (head of the HUF) as per the clubbing provisions of the Income Tax Act. It's important to understand these provisions to ensure proper tax compliance.

4. Maintaining Records: HUFs should maintain proper books of accounts and financial records to support their income and expenditure. This is essential for accurate tax filing.

5. HUF PAN Card: It's advisable for the HUF to obtain a separate Permanent Account Number (PAN) card for tax-related transactions.

6. Filing Returns: HUFs are required to file their income tax returns by the specified due date, just like individuals.