Invest in international stocks? Nithin Kamath shares major change in Budget 2023 for retail investors


Union Finance Minister Nirmala Sitharaman on 1 February presented the annual Budget of the country in the parliament, announcing a slew of changes for different sectors and the common man.

One such change that the finance minister announced was the changes in Tax Collection at Source (TCS) in the case of remittances.

Analysing the Budget speech of the finance minister, Zerodha co-founder and CEO Nithin Kamath said there’s one materialised change for retail investors who invest in international stocks.

As per the latest announcements ‘money sent out using Liberalised Remittances Scheme (LRS) now has a TCS of 20% with no upper or lower threshold. Earlier, there was 5% TCS on 7 lakh or above.

“For foreign remittances for other purposes under LRS and the purchase of overseas tour programs, the TCS rates will get increased to 20% from the previously applicable 5% from 1st July 2023,” FM Sitharaman mentioned in her Budget speech.

In the case of education or medical-related remittance, there’s no change in TCS. However, for an overseas tour package and any other case, the TCS of 20% will be applicable without any threshold limit from 1 July 2023. This will come into effect after the bill is passed.

For instance, if you plan to remit 50,000 then a TCS of 10,000 will be applicable from the next financial year. Assume the tax on your income is 5,000 then the TCS of 10,000 will be adjusted and you will get a refund of 1,000 as part of the filing of your yearly taxes.

How will impact retail investors?

If you are converting INR to any other currency for the purpose of investment in international stocks, in such case an Indian bank is required to collect TCS at the rate of 20% on the aggregate remittance amount during a Financial Year.

For instance, if an investor wants to remit and convert 10 lakh to US dollars. he bank would deduct a TCS of 20% on 10 Lakh. The TCS would be 2,00,000 in this case.

However, the money paid in taxes as TCS can be adjusted while filing your Income Tax returns (ITR). The TCS can be claimed as an income tax refund or a credit can be availed while filing ITR or for computing the advance taxes. Banks also provide a TCS certificate at the time of deduction which is used while filing your tax returns.

Nithin Kamath said, “it is unlikely that many will be okay with having 20% of capital blocked until then”.

According to Kamath, the 20% TCS will adversely affect all platforms offering international stocks and crypto exchanges.

Further, Kamath said the 20% TCS would not affect his compnay-Zerodha as they don’t offer international stock investment in their platform due to “uncertainty around regulations and high remittance costs”.

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