The Tax Collected at Source (TCS) rules have undergone several changes in recent years, and April 2025 brings new updates that taxpayers must be aware of. Whether you’re an individual making foreign transactions, a business owner, or an investor, understanding these rules is crucial to avoid penalties and ensure compliance.
In this blog, we’ll break down the latest TCS rules effective from April 2025, covering key changes, applicability, exemptions, and how they impact different types of transactions.
What is TCS?
Tax Collected at Source (TCS) is a tax collected by the seller or service provider from the buyer at the time of sale. The collected tax is then deposited with the government. Unlike TDS (Tax Deducted at Source), which is deducted from payments, TCS is collected on receipts.
Key TCS Changes Effective April 2025
1. Higher TCS on Foreign Remittances (Under LRS)
- The TCS rate on foreign remittances under the Liberalised Remittance Scheme (LRS) has been revised.
- New Rate: 20% (up from the previous rate, unless exemptions apply).
- Applicability: Covers overseas travel, education, investments, and other remittances exceeding ₹7 lakhs per financial year.
2. TCS on Overseas Tour Packages
- A flat 20% TCS will apply on overseas tour packages, regardless of the amount.
- Earlier, a lower rate was applicable if the total remittance was below a certain threshold.
3. TCS on Sale of Goods
- Sellers with annual turnover exceeding ₹10 crores must collect TCS on the sale of goods if the buyer’s total purchase exceeds ₹50 lakhs in a financial year.
- Rate: 0.1% (1% if PAN/Aadhaar is not provided).
4. TCS on Crypto & Virtual Digital Assets (VDA)
- Cryptocurrency and other digital asset transactions will attract a 1% TCS from the buyer.
- This is in addition to the 30% tax on profits from such transactions.
5. Exemptions & Threshold Adjustments
- Education Loans: TCS on foreign education payments funded by loans remains at 0.5% up to ₹7 lakhs.
- Medical Treatment: TCS on medical treatment abroad is exempt up to ₹7 lakhs per year.
Who is Responsible for Collecting TCS?
- E-commerce operators (for seller transactions).
- Sellers of goods (with turnover above ₹10 crores).
- Authorized dealers (for foreign remittances under LRS).
- Crypto exchanges (for digital asset transactions).
How to Claim TCS Credit?
The TCS amount collected can be claimed as a credit while filing your Income Tax Return (ITR). Ensure that:
- The TCS is reflected in Form 26AS or AIS.
- You have valid proof of payment (invoice, challan, etc.).
Penalties for Non-Compliance
- Failure to collect TCS may lead to penalties equal to the amount not collected.
- Late payment interest of 1% per month applies.
Final Thoughts
- The updated TCS rules in April 2025 aim to widen the tax net and ensure better compliance, especially for high-value transactions. Whether you’re planning an international trip, investing in crypto, or running a business, staying informed will help you avoid unnecessary tax burdens.
- Always consult a tax advisor for personalized guidance based on your financial transactions.