The Central Board of Direct Taxes (CBDT) recently unveiled new income tax forms that will bring about changes in tax regulations. With these updates, various individuals will now have the option to claim Tax Collected at Source (TCS) credits in place of the original payer. This amendment is particularly beneficial for people facing expenses related to travel and study abroad.

TCS restructuring credit for external expenses

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The updated tax regulations now allow a different person to benefit from the TCS credit, apart from the original payer. This change aims to allow taxpayers to manage their tax obligations more effectively. This reform allows parents or legal guardians, who have paid their children’s education fees abroad to the TCS, to transfer the credit to their own tax return.

The aim of this flexibility is to alleviate the financial burden on families. In the past, only the child could qualify, but now parents can also benefit, thereby reducing their total tax liability.

As per the regulations, tax collected at source (TCS) will be implemented if the funds sent abroad exceed Rs 7 lakh. The 5% TCS will be applied as and when the individual makes the payment.

Claim TCS credit

In order to claim the TCS credit, individuals must follow the process outlined below:

The collector who made the payment must provide a statement to the tax collector (such as a bank or TCS collecting institution). This declaration must specify that the credit is to be applied to the PAN of another person.

Required information:

Name and address of the person claiming the credit.

Permanent Account Number (PAN) of the recipient.

Amount of TCS paid on expenses.

Form 12BAA

The CBDT recently unveiled a new form, Form 12BAA, designed for reporting non-salary income and inclusion of tax collected at source (TCS) details. These forms, aligned with the guidelines 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 TDS on the salary.

Form 12BAA is a declaration that describes the specific details of subsection (2B) of section 192. Employees must use this newly introduced form to inform their employers of any deductions made on income from sources other than their wages. These sources may include income from fixed deposits, commissions on insurance policies, dividends from stock investments or taxes levied on the acquisition of goods or services such as vehicles or foreign currency.