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Indore smart city in the MP state is a pioneer in the field of studies. It is also evident in the rise in number of scholars who want to pursue higher studies from abroad. However, studying overseas requires a lot of preparation before the onset of your journey. One such thing is the tax that you will have to pay to transfer your money overseas. According to the study abroad consultants in Indore, it is crucial for parents and students to understand the TCS or Tax Collection at Source.
What Is the Meaning of Tax Collection at Source (TCS)?
As per the Income Tax Act, a person remitting a large sum to study in a foreign location must pay a tax called the TCS. It is collected by the bank or the authorized dealer who transfers the money abroad. Later, this tax is deposited with the government. Furthermore, the Liberalized Remittance (LRS) Scheme decides rates for the TCS.
Let us now understand the impact of this tax on the expenses that Indore students will have to incur for studying abroad.
Impact of TCS On Study Abroad Expenses
In recent years, the number of students who are planning for studying overseas has risen. It is a life-changing chance for them to get a brighter future. However, most of them are still unaware of the various aspects of this journey. The same is true for the TCS. Therefore, it is necessary to take expert advice so you can plan your trip accordingly. The following are some of the impacts that the TCS will have on your financial planning.
Increased Cost
The cost of studying overseas will increase when 5% TCS is added to the living expenses and tuition fees. It will be an extra expense for the parents.
Budget Adjustment
Students will have to consider the tax deduction when planning their budget. For instance, every ten lakhs after the seven lakh limit will incur INR 15,000 in TCS.
Cash Outflow
There will be an immediate outflow of the cash as the tax will be collected at the time of remitting. As per the study abroad consultants in Indore, this reduction will impact the finances.
Tax Credit
There is a way to get a refund on the sum that you pay as TCS. However, if applicable in your case, it will require proper documents, timely filing, and proper planning.
College Choices
TCS can also cause students to change their choice of location or college. They might choose a country with fewer TCS for their studies.
Need for More Funds
To meet the extra expense of TCS for studying overseas, you will need to gather more funds in addition to the expenses of living and studying.
Rates for TCS On Overseas Education
Some fixed regulations govern the amount of tax one must pay to send money abroad. If you are sending about seven lakh rupees in a year, then the TCS applied will be 0%. However, for a sum above that, the TCS rates are as follows:
- From the 1st of October 2023, the TCS on studies is 5%.
- However, the rate is 0.5% if the amount is being transferred through a loan.
For example, if a person has to send over 15 lakh rupees for studying overseas, then the TCS for seven lakhs is zero. Furthermore, the TCS for the remaining eight lakhs will be 5% without a loan and 0.5% with a study loan. However, there are still some ways for Indore students to avoid this tax.
Ways to Avoid TCS On Money Transfer
The experts advise not to avoid this tax. However, there are certain ways for study abroad aspirants to reduce the sum they pay as tax. By using these, they can mitigate the financial impact of the TCS.
Scheduled Transfers
One way of avoiding the 5% tax is to schedule your payments in a manner that you do not exceed the limit of seven lakhs for every financial year. This way, you will be exempted from the TCS.
Split The Sum
Another way is to divide the amount that is remitted among different people. This way, the sum for an individual will not be more than the limit. Furthermore, no tax will be applicable.
Study Loans
Lastly, study abroad consultants in Indore suggest that using a study loan to transfer money will reduce the rate from 5% to 0.5%. However, you will have to pay the interest for the loan.
Conclusion
To conclude, the TCS is a requisite for those wanting to study abroad. However, with meticulous planning and proper guidance, Indore students can alleviate the impact on their finances. Furthermore, guidance from study abroad agents, like Gradding.com, will also help them deal with other aspects of their journey overseas. In addition to that, they also have some very special offers like cashback and free flight tickets for students.
