CBDT recently amended the income tax rules and introduced a new form that will help parents claim TCS Credits for foreign education of their children.
Reetu | Oct 24, 2024 |
New Income Tax Rule: Now Parents Can Claim TCS Credits for Foreign Education of Children
The Central Board of Direct Taxes (CBDT) recently released new income tax forms that will bring in changes to tax regulations. This amendment is particularly beneficial for individuals encountering expenses related to international travel and education.
CBDT has recently amended the income tax laws, enabling individuals other than the original taxpayer to claim Tax Collected at Source (TCS) credits. The new guidelines provide parents with additional flexibility in managing their children’s tax obligations while studying abroad. They can use TCS credits to offset their taxable income, potentially lowering their overall tax liability.
The aim of this flexibility is to reduce financial burdens on families. Previously, only the child could claim it, but now parents can also, reducing their overall tax liability.
Pursuant to the regulations, Tax Collected at Source (TCS) will be implemented if the overseas remittance exceeds Rs.7 lakh. The 5% TCS will be levied as the individual makes the payment.
To facilitate this, the payer must file a declaration with the tax collector stating that the TCS credit should be allocated to another person’s PAN.
These amendments benefit parents who are supporting their children’s foreign education. The ability to immediately claim TCS credits simplifies the process and provides more flexibility in tax planning.
To claim the TCS credit, individuals must follow the steps listed below.
The collector who made the payment must make a declaration to the tax collector (for example, a bank or institution collecting TCS). This declaration should specify that the credit will be applied to another person’s PAN.
Information required in the declaration:
Once you obtain the declaration from the collectee, you must send it to the tax collector. The tax collector could be a bank or another institution that collects the TCS.
After receiving your declaration, the tax collector checks the information and credits the TCS amount to your PAN.
The CBDT has recently unveiled a new form, Form 12BAA, designed for the reporting of non-salary income and the inclusion of Tax Collected at Source (TCS) details. These forms, aligned with the directives specified in the Union Budget 2024, will streamline the process of offsetting Tax Deducted at Source (TDS) and TCS amounts collected from sources other than salary against the TDS on salary.
The Form 12BAA is a statement that provides specific information for Section 192, Subsection (2B). Employees must use this recently introduced new form to notify their employers of any deductions taken from income other than their salaries. These sources could include revenue from fixed deposits, commissions from insurance policies, dividends from stock investments, or taxes paid upon the purchase of goods or services such as vehicles or foreign currency.
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