This article shows you the method for lowering the effect of Tax Collected at Source (TCS) on foreign remittances and travel via RBI’s Liberalised Remittance Scheme (LRS) as per new rules introduced under Union Budget 2024.
This article is a part of our detailed article series on Union Budget 2024. Ensure you have read the other parts here:
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Form 12BAA allows you to offset Tax Collected at Source (TCS) for foreign remittances under the RBI’s Liberalised Remittance Scheme (LRS), as well as on car purchases above ₹10 lakhs, against TDS on salary.
Union Budget 2024 introduced the concept of this offset facility applicable after 1st October 2024 and Form 12BAA was introduced on 15th October 2024.
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Form 12BAA is a new form introduced by the CBDT that allows employees to report taxes deducted or collected from non-salary income to their employer, enabling more accurate TDS calculation and potentially increasing their take-home pay.
Form 12BAA was introduced to allow employees to declare taxes from non-salary income sources to employers, reducing overall TDS and preventing excess tax deductions.
By using Form 12BAA, employees can report other income and tax deductions, enabling employers to adjust TDS calculations and lower the total tax deducted from their salary.
Form 12BAA is for salaried employees with additional income sources, such as fixed deposits, dividends, or income from house property, foreign remittances and car purchases where taxes are already deducted or collected.
Form 12BAA requires employee details like name, PAN, tax year, and specific information on TDS and TCS deductions, including the section, deductor’s name and TAN, and amounts of income and tax.
Form 12BAA helps in reducing TDS on salary, increasing cash flow through higher take-home pay, ensuring comprehensive income reporting, simplifying tax compliance, and reducing refund claims.
Form 12BAA allows reporting of non-salary income such as fixed deposit interest, dividends, insurance commissions, and losses from house property, along with corresponding TDS or TCS deductions.
Form 12BAA will be effective from 1 October 2024, as per Notification No. 112/2024 issued by the CBDT.
The Income Tax Rules were amended to include Form 12BAA, update Rule 26B for non-salary income reporting, and modify Forms 10E, 16, and 24Q for alignment with the new requirements.
No, Form 12BAA also considers TDS and TCS from non-salary income sources, providing a more accurate tax calculation for employees with multiple income streams.
TDS is tax you must pay eventually while TCS is always offset against tax you must pay in the future. Therefore, there is no benefit in declaring TDS via Form 12BAA since that will not reduce the salary TDS. Only TCS, if any, when declared via 12BAA will reduce salary TDS. Of course, if you have income apart from salary, you must pay tax on it as per the usual advance tax payment dates.
Related:
Budget 2024 TCS Changes: Minimise the Impact Of TCS on Your Foreign Stocks and other LRS Investments
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Published: 20 November 2024
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This post titled Form 12BAA: How to reduce TCS on foreign remittances and foreign travel after 1st October 2024? first appeared on 08 Nov 2024 at https://arthgyaan.com
