New TCS Rules for Parents: Claim Education Credits
The Central Board of Direct Taxes (CBDT) has recently revised income tax regulations to allow individuals other than the primary taxpayer to claim Tax Collected at Source (TCS) credits. This update provides parents with more options for managing the tax responsibilities associated with their children studying abroad. They can now claim TCS credits against their taxable income, which may help in reducing their overall tax bill.
“This modification is especially beneficial for those covering expenses related to overseas studies. Previously, the TCS credit could only be claimed by the student; however, now parents or guardians paying TCS on tuition fees for their children abroad can transfer this credit to their own tax returns. To do so, the payer must submit a declaration to the tax authority, indicating that the TCS credit should be allocated to another person’s PAN,” explained Kunal Savani, Partner at Cyril Amarchand Mangaldas.
Ritika Nayyar, Partner at Singhania & Co., elaborates on how tax calculations will work. For instance, if Suresh pays Rs 20 lakhs in tuition fees for his daughter’s foreign education, TCS deducted at 5 percent amounts to Rs 1 lakh. Under the previous regulations, Suresh would have needed to obtain a TCS certificate from the foreign university and claim that credit in his income tax return. However, with the updated guidelines, he can directly claim the Rs 1 lakh TCS credit in his return, thus lowering his taxable income and potentially saving on taxes.
“These amendments provide significant advantages for parents supporting their children’s education abroad. The direct ability to claim TCS credits streamlines the process and enhances flexibility in tax planning,” Ritika added.
What is Form 12BAA?
Form 12BAA is designed to improve the disclosure of non-salary income and the details of Tax Collected at Source (TCS). This initiative aligns with the guidelines established in the Union Budget 2024.
How to claim TCS credit?
The individual who made the payment (the collectee) must provide you with a declaration. This declaration should specify that the TCS credit is to be applied to your PAN (Permanent Account Number).
The following information is required in the declaration:
- Your full name and address as recorded in your PAN details.
- Your PAN number, which is crucial for your identification as the recipient of the TCS credit.
- A clear statement of the TCS amount that was collected and paid on your behalf.
Once you receive this declaration from the collectee, you should submit it to the tax collector, which may be a bank or any institution that collected the TCS.
After receiving your declaration, the tax collector will verify the details and credit the TCS amount to your PAN.