India taxes individuals based on a system of income slabs. Different tax rates are assigned to different ranges of income.&nbsp;

Understanding tax slabs is crucial for several reasons.

As a person earns more, the tax liability also increases, creating a fair and progressive tax system in the country. To achieve this, the government regularly updates and announces changes to tax slabs in the Union Budget.

The income tax slabs differ between the old and new tax regimes. Let's explore the specific slab rates applicable to Individuals for FY 2022-23 (AY 2023-24) and FY 2023-24 (AY 2024-25).

Income Tax Slab Rates For FY 2023-24 (AY 2024-25)&nbsp;

Rates of the old tax regime slabs are categorized into three groups:

The new tax regime applies uniform tax rates to all individuals, eliminating the age-based distinctions in the old system. The new tax regime slabs 2023-24 are outlined below.

Applicability of Surcharge for FY 2023-24 (AY 2024-25)

The income tax <a href="https://incometaxindia.gov.in/charts%20%20tables/tax%20rates.htm">surcharge</a> is an extra fee imposed on top of the <a href="https://www.skydo.com/blog/how-to-file-taxes-under-44ada?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">regular income tax</a>. An additional tax is applied to individuals with higher income earnings in a specific financial year. Let’s look at the applicable surcharge rate under the Old and New tax regime.

However, 25% or 37% surcharge rates will not apply to income under the following sections.

Consequently, the highest surcharge rate on the tax payable for such incomes will be 15%.

Starting from the Assessment Year 2023-24, the maximum surcharge rate on tax payable for dividend income or capital gain specified in Section 112 will be capped at 15%.&nbsp;

A 4% Health and Education cess will be applied to all cases’ total income tax liability and surcharges.

Comparison of tax rates under the New tax regime and the Old tax regime for FY 2022-23 (AY 2023-24)

How do you calculate the income tax from the income tax slabs?

Let’s understand the calculation with an example.

Sanjana, aged 35, has a total taxable income of Rs. 8,50,000. She has opted for the old tax regime. Her income includes income from salary, interest and rental income. Deductions under section 80 have been reduced. Now, Sanjana wants to know her <a href="https://www.skydo.com/blog/gst-requirements-international-service-sales?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">tax liability</a> for FY 2022-23 (AY 2023-24).

*Sanjana, an individual taxpayer under the age of 60, enjoys an income exemption limit of up to Rs 2,50,000. Other taxpayers, i.e., senior and super senior citizens, have higher income tax exemption thresholds of Rs 3,00,000 and Rs 5,00,000, respectively.

Please be aware that the tax rates in the New Tax Regime are uniform for all categories of individuals, including regular individuals, senior citizens, and super senior citizens.&nbsp;

Individuals with a net taxable income of up to Rs 5 lakh qualify for a tax rebate under section 87A, resulting in zero tax liability in both the New and Old tax regimes. It's important to note that in Budget 2023, the rebate under the new regime has been extended, making income up to Rs 7 lakh tax-free from the FY 2023-24 onward.

Let's delve into effective strategies to maximize your investments while minimizing the associated tax burdens.

ELSS mutual funds provide a dual benefit of potential capital appreciation and tax savings under Section 80C of the Income Tax Act. Investing in ELSS reduces taxable income and offers a path for long-term wealth growth.

2. Explore tax-efficient investment avenues

Health insurance qualifies for tax benefits under Section 80D. You can claim tax benefits on premiums paid - up to Rs 20,000 for senior citizens and Rs 15,000 for others. For example, if you pay Rs 15,000 for your policy and Rs 20,000 for your senior citizen parent, you can claim a total tax benefit of Rs 35,000.&nbsp;

Maturity value is tax-free for sums received under critical illness insurance policies.

This strategy entails selling loss-making assets to realize the capital loss and using it to offset the gains earned by profit-making assets.

For instance, if you have a loss of Rs. 20,000 in Stock A and a gain of Rs. 30,000 from Stock B, you can sell Stock A during a market downturn to offset the gains. This way, you can reduce your taxable income. The saved amount can be reinvested for portfolio growth.

Ensure that tax loss harvesting aligns with your overall financial goals and plan by considering a discussion with a financial professional or tax advisor.

<a href="https://www.skydo.com/blog/how-can-the-right-chartered-accountant-help-your-tech-export-business?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Consult financial professionals or tax advisors</a> for effective tax planning and strategic advice. Their expertise can provide tailored insights aligned with your financial goals and ensure a well-informed approach to optimize your tax situation.

If you need help deciding what is right for you, we will connect you with our panel of Indian and US-based CA / CPAs. Feel free to reach out to us.

Q1. How is a taxpayer's income categorized?

Ans: A taxpayer's income falls into five categories outlined in Section 14 of the Income Tax Act. These include Income from salary, Profits from a business or profession, Income from House Property, Capital Gains, and Income from Other Sources.

Q2. Is it possible to avail of 80C deductions while choosing the new tax slabs 2023-24?

Ans: No, under the new tax regime, several deductions and exemptions, including those under section 80C, are not permitted. Opting for the new tax regime means foregoing the ability to claim deductions under section 80C.

Q3. What do "Previous Year" and "Assessment Year" mean?

Ans: We have two important terms in income tax provisions: (i) Previous Year and (ii) Assessment Year. Previous Year is when you earn income, typically from April 1st to March 31st. The year right after the Previous Year, from April 1st to March 31st, is called the 'Assessment Year.'

For example, the Previous Year is from April 1, 2023, to March 31, 2024 (FY 2023-24). The corresponding Assessment Year is from April 1, 2024, to March 31, 2025 (AY 2024-25).

Q4. What is the tax exemption limit for calculating income tax rebate under section 87A?

Ans: For FY 2023-24 (AY 2024-25), the rebate limit has been increased to Rs. 7,00,000 under the new tax regime. This means a resident individual with taxable income up to Rs 7,00,000 will receive Rs 25,000 or the amount of tax payable (whichever is lower) as tax relief. However, the old tax regime's threshold limit will remain the same, i.e., Rs 12,500 if taxable income is up to Rs 5,00,000.

Q5. How much is the standard deduction for FY 2023-24?

Ans: You can claim a standard deduction of ₹50,000 to the income taxable under the head ‘Salaries.’ The standard deduction is a tax benefit that can be claimed irrespective of the amount spent on Transport or Medical Allowance. It applies to individuals earning a salary or pension income.

Prepare for the upcoming year's tax season by understanding the tax slabs for 2023-24 and optimizing your tax savings. 

Tax Slabs in 2023-24: Plan Ahead for Next Year Tax Savings

Tax Slabs in 2023-24: Plan Ahead for Next Year Tax Savings Th

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Rohit Khuranna

With global connectivity on the rise, seamless international payments have become more essential than ever.&nbsp; Wise (formerly TransferWise) has been a game-changer, simplifying international transfers for millions worldwide. In this blog, we’ll explore Wise’s key features and dive into the top 5 Wise alternatives, comparing how they stack up in facilitating seamless global payments.

Wise (<a href="https://www.skydo.com/blog/transferwise-india-features-benefits-pros-cons">formerly TransferWise</a>) is a global money transfer platform operating worldwide. While it initially started out as a peer-to-peer (P2P) remittance service, <a href="https://wise.com/?no_follow=true/">Wise</a> has since diversified its offerings to cater to businesses by introducing multi-currency accounts for both individuals and enterprises.&nbsp;

P2P and B2B Transfers:&nbsp;Wise supports both P2P and B2B transfers, making it suitable for personal and business payments. However, the pricing varies between the two&nbsp;

Virtual International Accounts:&nbsp;Wise provides virtual international accounts for B2B payments, supporting multiple currencies like USD, AUD, and more.

Debit/Expense Card: Wise also offers debit/expense cards which can be used in 175+ countries

Mid-Market Exchange Rate:&nbsp;Wise provides mid-market exchange rates with no added forex markup during currency conversion.

Instant FIRA: Wise offers instant FIRA for every transaction, easing compliance.

Customer-Friendly Interface: Many wise users have applauded the platform for its user-friendly and intuitive interface&nbsp;

Possibility of High Transaction Fee: Wise's fee varies across currencies,&nbsp; but broadly speaking, it can be around 1.6-1.8% of the transfer amount, which can add up for bigger payments. for example, if you receive a payment of USD 10,000, Wise will charge around<a href="https://wise.com/in/business/receive-money?no_follow=true"> USD 165 for the same</a>.&nbsp;

Additional Charges for FIRC: Wise offers FIRC for every transaction but it levies a fee for it which varies across currencies. For USD payments, it is around <a href="https://wise.com/in/business/receive-money?no_follow=true">USD 2.50</a>

Instances of Limited Customer Support: Some users have noted that their <a href="https://www.g2.com/products/transferwise/reviews?utf8=%E2%9C%93&amp;filters%5Bnps_score%5D=1#survey-response-9454134?no_follow=true">customer support </a>occasionally lacks the effort to understand and resolve queries fully

Wise caters to both personal and business transfers, making it ideal for freelancers, small businesses, and individuals. Freelancers often prefer Wise for receiving international payments, while the Wise card is a convenient option for seamless transactions while travelling abroad

Now, that we have had a quick overview of Wise, let's take a look at a few of the leading alternatives to Wise and see how you can be wiser while receiving international payments.&nbsp;

What are 5 Wise Alternatives for Receiving International Payments?

In the following sections, we will explore these wise alternatives in detail to see if they are your right choice for receiving international payments

Skydo is a wise alternative that simplifies cross-border payments for freelancers and medium/small businesses in India. It offers virtual international bank account details to its users in under 5 minutes and also supports an entire payments ecosystem consisting of payment tracking, invoice generation and more.

Virtual International accounts: Skydo offers virtual international accounts in key regions like the US, UK, Europe, Australia and more.&nbsp;

Live Forex Rate: Skydo offers live forex rate without any forex markup or currency conversion fee.&nbsp;

Invoice Creation and Payment Tracking:&nbsp;Skydo simplifies international payments with tools like an intuitive invoice maker and real-time payment tracking, ensuring transparency every step of the way

Flat and Transparent pricing:&nbsp;Skydo offers flat, transparent pricing for transfers up to USD 10,000, regardless of the payment amount: USD 19 for transfers up to USD 2,000, and USD 29 for transfers between USD 2,001 and USD 10,000—with no additional monthly or annual fees.

Free and Instant FIRA:&nbsp;The platform provides <a href="https://www.skydo.com/blog/all-you-need-to-know-about-firc-a-complete-guide">instant FIRA </a>for every transaction, completely free, simplifying compliance for businesses.

Local Customer Support:&nbsp;Each skydo user is assigned a local representative to assist with the onboarding process and to address any questions at any time.

Inward Remittance Only:&nbsp;Skydo currently supports only inward remittances, meaning you can receive international payments in India but cannot send payments abroad using Skydo

Not Best for Smaller Transfers: Skydo might also not be the most cost-effective pick for smaller transfers, essentially for transfers below USD 1000

Skydo is a strong Wise alternative for businesses seeking fast and cost-effective international payments in India. With its user-friendly interface, features like payment tracking and an integrated invoice maker, and robust customer support, Skydo is an ideal choice for both freelancers and established businesses to receive seamless global payments

<a href="https://www.skydo.com/blog/paypal-in-india-charges-review-alternatives">PayPal</a> is a go-to payment solution worldwide and a viable wise alternative, both for personal and business transactions. It offers multiple payment options with a wide range of ancillary services

Personal and Business Transfers: Like Wise, Paypal also supports both b2b and p2p transfers worldwide.&nbsp;

Buyer and Seller Protection Programme:&nbsp;PayPal provides buyer protection for missing or misrepresented items and seller protection in India for unauthorized transactions or undelivered shipments.&nbsp;

Robust Security:&nbsp;The platform also enforces strict security measures, including 24/7 account monitoring, to ensure the safety of funds.

Global credibility:&nbsp;With its credibility and global reach, PayPal is a trusted platform for making and receiving international payments.

Free monthly FIRA:&nbsp;PayPal provides Indian businesses with free monthly digital FIRA. All international transactions of the previous month will be referenced in a single FIRA, which will be available by the 15th of the subsequent month.

Wide Range of Services: Beyond, a remittance platform, PayPal offers a wide range of services, including e-commerce integration, invoice management etc.&nbsp;

High Transaction Fees:&nbsp;business owners can find, PayPal to be an expensive option for receiving international payments. The costs include a 4.4% transaction fee and a USD 0.30 flat fee.&nbsp;

High Currency Conversion Fee: Along with a hefty transaction fee, PayPal also levies&nbsp;an additional 4% markup on the exchange rate.

Instances of Limited Customer Support: While PayPal is widely applauded for its ease of use and convenience, some users have complained about its&nbsp;inadequate customer support.

PayPal is a trusted choice for those seeking flexible payment options. Its ability to handle multiple payment methods and numerous integrations makes it ideal for businesses looking to streamline their payment processes and manage finances effortlessly.&nbsp;

Founded in 2005, <a href="https://www.skydo.com/blog/payoneer-payment-gateway-features-fees">Payoneer</a>&nbsp;is quickly becoming a popular payment solution for businesses and freelancers worldwide.&nbsp;

Virtual International Accounts: Like Wise and Skydo, Payoneer also offers virtual international accounts in multiple currencies.&nbsp;

Multiple Integrations:&nbsp;Payoneer integrates seamlessly with various e-commerce platforms and marketplaces, including Walmart, Fiverr, and Toptal."

Getting Paid from Marketplaces:&nbsp;Payoneer’s integration with marketplaces like Walmart and Fiverr simplifies payment processing from these platforms.

Free Digital FIRA: Payoneer offers free digital FIRA for every international payment.&nbsp;

Steep Fees: <a href="https://www.payoneer.com/en-in/about/pricing/?no_follow=true">Payoneer's fees </a>are on the steep side. Credit card payments&nbsp;incur a&nbsp;3.2% + $0.49 fee, and ACH Bank Debits (US) cost 1%. PayPal payments attract&nbsp;3.99% + $0.49 fee.&nbsp;

<a href="https://www.skydo.com/blog/payoneer-fees-india-guide">Virtual account payments</a> are free for EUR/GBP but up to 1% for USD.&nbsp;

 Withdrawals to local bank accounts attract up to a 3% fee for different currencies. There is also a possibility of a forex markup being levied during currency conversion

Ancillary Charges: Beyond these fees, Payoneer also levies an annual fee&nbsp;of $29.95&nbsp; if total payments received are below $2,000 in a year.&nbsp;

Limited Customer Support: Many users have expressed dissatisfaction with&nbsp;<a href="https://www.g2.com/products/payoneer/reviews/payoneer-review-8804769?no_follow=true">Payoneer's customer support.</a>

Payoneer is a viable wise alternative for businesses with clients or operations across multiple regions. Ecommerce businesses can also streamline their finances with Payoneer’s seamless integration with platforms like eBay, and Shopify, and freelancers can also benefit from Payoneer's integration with Fiverr, Toptal etc.&nbsp;

Founded in 2010 by entrepreneur brothers Joseph and Patrick Collison, Stripe is an Irish-American company that simplifies global payments for businesses.

Multiple Currency Support: With Stripe businesses can receive international payments in over 135 currencies

Big Suite of Payment Solutions: Beyond facilitating international transfers, Stripe offers a whole suite of payment solutions like invoice management, subscription management, fraud detection and more.

Flexibility:&nbsp; Stripe provides the flexibility to generate instant payment links or embed its checkout solution directly on your website, supporting both one-time and recurring transactions.

Ease of Use:&nbsp; Businesses praise how simple it is to embed Stripe on their websites and appreciate features like subscription management and invoicing.

Invite only in India:&nbsp;Stripe operates on an 'invite-only' basis in India, requiring new businesses to request approval. The timeline for approval is unclear, and Stripe currently supports only a limited number of businesses.

Card Support in India only: While Stripe supports a variety of payment methods globally, Indian businesses are limited to accepting international payments via cards.&nbsp;

High Charges:&nbsp;Stripe India charges a 4.3% processing fee per successful transaction. Additionally, there’s a 2% currency conversion fee for payments in foreign currencies.

No FIRA provided: Stripe doesn't offer FIRA for international payments in India, making compliance difficult for businesses.&nbsp;

Stripe is best suited for businesses looking for an all-in-one payment management platform. However, with Stripe becoming invite only in India, it is advisable to look for a more accessible wise alternative in India.&nbsp;

Established in 2015, <a href="https://in.pingpongx.com/in/index?no_follow=true/">PingPong</a>&nbsp;is a wise alternative aiming to simplify international payments for freelancers, businesses, and e-commerce sellers.

Virtual International account: Ping Pong too provides virtual international accounts in multiple regions

Partnership with leading e-commerce platforms: PingPong has integrated with many e-commerce platforms including Walmart, Shopify and more.

Integrated Tax Payment: Ping Pong lets users pay VAT/GST and other taxes with no additional costs.

Digital FIRA: Ping Pong offers digital FIRA for international payments at no additional cost.&nbsp;

Transaction Charges Can Add Up:&nbsp;PingPong charges a competitive 1% transaction fee, which is attractive. However, these low fees can add up and become substantial for larger transactions. For example, for a payment of 10,000 USD, the transaction fee would be 100 USD.&nbsp;

Lack of Transparency on Exchange Rate:&nbsp; Since there is a lack of clarity around Ping Pong’s forex rate, there is a possibility of a markup on that rate.

PingPong is an apt wise alternative for both freelancers and particularly e-commerce sellers thanks to their integration with multiple marketplaces.&nbsp;

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Wise alternative

Planning any international travel or making an international purchase? You might be in for a surprise when it comes to taxes. Since the 2023 Union Budget, Tax Collection at Source (TCS) has become a crucial part of foreign remittances, impacting your tax obligations. If you’re sending money abroad or making outward money transfers, you could be facing a 20% tax under the <a href="https://www.skydo.com/blog/what-is-lrs?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Liberalised Remittance Scheme (LRS)</a>.

So next time you make a big foreign payment, expect to pay extra for TCS which is collected by the receiving bank or business. This blog will give a thorough understanding of TCS to help you navigate the complexities of cross-border payments.&nbsp;

What is TCS or tax on foreign remittance?

TCS (Tax Collected at Source) is a tax system in India where the seller collects a tax from the buyer on specific goods or services. This collected tax is then remitted to the Income Tax Department. One example is its application to transactions like sending money abroad under the Liberalised Remittance Scheme (LRS), which we'll be discussing in this blog. The primary purpose of TCS is to track large transactions and prevent tax evasion. The tax rate varies depending on the type of transaction and is added to the sale price.

Difference between TCS and TDS on foreign remittance

Given the lack of discussion on TCS, it's easy to mix it up with TDS. Let's clear the air and distinguish between the two.

TDS is the tax deducted by the payer while making certain payments from various sources. The most common instance is the TDS deducted by companies while paying salaries. TCS on the other hand, is the tax collected by the seller on the sale of certain goods. For example, when you buy alcoholic liquor, the price includes 1% TCS. In a nutshell, TDS is deducted by the payer while TCS is collected by the seller.&nbsp;

Let's dive deeper to understand everything about TCS on foreign remittance so that you can minimise your tax burden.

When is Tax Collected at Source (TCS) on Foreign Remittance applicable?

Tax collected at source (TCS) applies when you send over INR 7 lakhs abroad in a financial year. For instance, if you are buying foreign company stocks worth INR 9 lakhs, you need to pay 20% TCS on 2 lakh (9 lakhs - 7 lakhs).

Prior to 2023, TCS on foreign remittances under the LRS was 5%. However, in the 2023 budget, the new TCS rate was increased from<a href="https://pib.gov.in/PressReleasePage.aspx?PRID=1936105" target="_blank"> </a><a href="https://pib.gov.in/PressReleasePage.aspx?PRID=1936105" target="_blank">5% to 20% to boost</a> tax revenue and promote domestic spending.&nbsp;

The TCS on foreign remittance for medical and educational expenses stands at 5% if the amount remitted exceeds INR 7 lakh. However, if medical and educational expenses are funded by a financial institution, 0.5% TCS will be applicable.

The new TCS rates became applicable from October 1, 2023.

Here are the activities on which TCS will be applicable:&nbsp;

4. Medical and Educational Expenses&nbsp;

Here is the breakdown for new and old TCS rates on different types of foreign remittances. Note that the new TCS rates will be applicable from 1st September 2023:

Note that the new TCS rates will be applicable from 1st September 2023.&nbsp;

TCS rate on Foreign Remittance Post Budget 2023

Let's try to understand the applicability of TCS via certain examples.&nbsp; 

Consider buying stocks worth INR. 10 lakh in a US company. Now, since the amount remitted is greater than INR 7 lakhs, 20% TCS will be applicable.&nbsp;

As mentioned, TCS will be collected on the amount exceeding INR 7 lakhs, which in this case is INR 10 Lakhs - INR. 7 lakhs, which comes to INR 3 Lakhs. As mandated, 20% TCS will be collected from INR 3 Lakhs which equals to INR Rs. 60,000

So if you are investing INR 10 lakhs in US stocks, you are effectively investing only INR 9,40,000 as the rest INR 60,000 will be collected as TCS.&nbsp;

Now consider that you are sending the same INR 10 lakh to your sister studying in the US to pay her fee. Since this amount is being remitted for educational purposes, instead of 20%, 5% TCS will be applicable on the amount exceeding Rs. 7 lakh.&nbsp;

Therefore, the total taxable amount will stay at INR 3 lakhs (Rs. 10 Lakhs - Rs. 7 lakhs)

However this time, instead of 20%, 5% TCS will be collected bringing the total amount to INR 15,000 (5% of INR 3 lakhs).&nbsp;

However, note that if you are unable to prove that the money sent abroad is for educational or medical purposes, 20% will be applicable.

Let's say the total remittance for the year adds up to INR 8 lakh, and this amount is financed through an education loan taken from a bank approved by the Reserve Bank of India (RBI).&nbsp;

In this scenario, a TCS of 0.5% would be applicable only on the amount exceeding the threshold of INR 7 lakh.&nbsp;

So, in this case, TCS would be charged on INR 1 lakh (INR 8 lakh - INR 7 lakh) at a rate of 0.5%, which translates to INR 500 (0.5% of INR 1 lakh)

While Tax Collected at Source (TCS) is not completely avoidable, here are some strategies you can use to minimise its impact:

#1: Adjust the TCS Against Your Final Tax Liability

If you have no or low tax liability, you can get the TCS on foreign remittance as refund while filing your ITR. Make sure to keep the following documents handy:

For example, let's say you purchase an overseas tour program package worth Rs. 9 lakh. With the new regulations, a 20% Tax Collected at Source (TCS) applies to the amount exceeding Rs. 7 lakhs, totaling Rs. 40,000. If your total income tax liability for the year is INR 1 lakh, you can offset the Rs. 40,000 collected as TCS against your liability, reducing the total tax payable to Rs. 60,000.&nbsp;

Submitting an erroneous TCS return can lead to penalties as per Section 271H. The penalty for such errors can range from a minimum penalty of Rs. 10,000 to a maximum penalty of Rs. 1,00,000. It is important for tax collectors to ensure the accuracy of their TCS returns to avoid facing these penalties and maintain compliance with tax regulations.

Here’s a quick read to understand<a href="https://www.skydo.com/blog/how-to-file-itr-for-freelancer?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link" target="_blank"> </a><a href="https://www.skydo.com/blog/how-to-file-itr-for-freelancer?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link" target="_blank">how to file your income tax return</a>.

#2: Make Foreign Investments Through LLPs

If you're making foreign investments, consider doing so through a Limited Liability Partnership (LLP), as these entities are <a href="https://www.google.com/amp/s/www.livemint.com/money/personal-finance/loophole-in-indian-investment-rules-how-llps-can-help-ordinary-indians-invest-abroad-and-avoid-taxes/amp-11690477164919.html">exempt from TCS</a>. LLPs are permitted to invest abroad via two modes: overseas direct investments (ODI) and overseas portfolio investments (OPI). In case of overseas portfolio investments, the 20% TCS rate doesn’t apply.&nbsp;

TCS is not applicable to payments made through international credit cards while overseas. Therefore, you can make international credit card payments while travelling abroad to reduce TCS liability.

Visa and Mastercard are the two major payment networks that offer international credit cards through various Indian banks. Many banks like SBI Cards, HDFC Bank, ICICI Bank, and Axis Bank provide credit cards powered by Visa or Mastercard that can be used internationally.

Additionally, American Express (Amex) is another network offering international credit cards in India. You can find Amex cards through banks like IndusInd Bank and YES Bank.

Remember, if your total foreign remittances (excluding travel packages) are less than Rs 7 lakh in a year, TCS doesn't apply. Each family member can use their own Rs 7 lakh limit, so plan your foreign remittances accordingly.&nbsp;

Also, as we have mentioned, educational and medical expenses abroad are exempt from the 20% TCS rule. Keep the relevant documents handy to claim this benefit.

The introduction of TCS on foreign remittance addresses two crucial concerns: tax revenue and domestic spending. It's imperative to clarify that TCS isn't an additional tax but rather a mechanism ensuring financial transparency and compliance, particularly in cross-border payments.

Here at Skydo, we're committed to streamlining international payments while adhering to compliance and transparency standards. With Skydo, receive international payments swiftly, free from forex or conversion fees, in a secure and compliant manner.

Have further questions about TCS on foreign remittance? Join our global community, where our panel of experts assist you in navigating the ever-evolving regulatory landscape.

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The Reserve Bank of India (RBI) serves as the supreme authority overseeing and regulating India's money market. RBI imposes penalties on banks and Non-Banking Financial Companies (NBFCs) for failing to comply with prescribed frameworks and guidelines, implementing necessary restrictions when required.

A significant recent operational restriction imposed by RBI was on Paytm Payments Bank. This blog aims to provide insights into the <a href="https://www.rbi.org.in/commonperson/English/scripts/FAQs.aspx?Id=3573#:~:text=After%20March%2015%2C%202024%2C%20you,Bank%20after%20March%2015%2C%202024">Paytm Payments Bank RBI ban</a> and explore strategies for ensuring better compliance moving forward. Join us to understand this important development and its implications.

It was all smooth sailing for Paytm and its subsidiary, Paytm Payments Banks, until January 31st when the RBI announced that it had placed major restrictions on the NBFC. The RBI was exercising its right under Section 35A of the Banking Regulation Act of 1949, to issue directives to banks and NBFCs to protect their customers’ financial interests.&nbsp;

On January 31, RBI imposed the following restrictions on Paytm Payments Bank, which it extended till March 15th.

Why Did RBI Put Restrictions on Paytm?&nbsp;

Here are the main reasons that led to RBI putting restrictions on Paytm and Paytm Payments Bank.

Under RBI’s guidelines for payment banks, they can not undertake lending activities. However, RBI identified that although Paytm Payments Bank does not lend to customers directly, it indirectly provides third-party <a href="https://www.niti.gov.in/sites/default/files/2023-02/DigitalBanking07202022_compressed.pdf">credit-dispensing products</a>.&nbsp;

One example is when you apply for loans from Paytm’s platform, they do not provide the loan directly but offer credit-dispensing products from top NBFCs.&nbsp;&nbsp;

Paytm owns 49% of Paytm Payments Bank, and the remaining 51% is owned by its founder and CEO, Vijay Shekhar Sharma. Although founders and parent entities can own a business, RBI requires the operations to be run independently by the company management to ensure they are aligned with customer interests.&nbsp;

RBI noted that although Paytm has maintained that the bank is run independently without any external influence, the governance has been highly influenced by Paytm and its CEO.&nbsp;

Thousands of bank accounts were identified to have been linked with a single PAN. RBI noted that if multiple fake accounts are created without the PAN holder's knowledge, the intention must be to use them for laundering money because it is difficult to identify the beneficial owner in such cases.&nbsp;

Furthermore, it drastically eroded the trust of users and seriously jeopardised the operational and security protocols needed for regulatory compliance.&nbsp;

Paytm and its founder and CEO Vijay Shekhar Sharma have announced that they are in frequent touch with RBI and holding talks to determine the next course of action to ensure the lifting of Paytm bank RBI ban. In an official response, Paytm announced that the ban would hurt its annual earnings by a staggering <a href="https://www.ndtv.com/india-news/paytm-paytm-news-explained-why-rbi-has-put-restrictions-on-paytm-payments-bank-4970845">₹300 crore to ₹500 crore</a>. Meanwhile, Paytm Payments Bank has paused its primary services, such as credit and deposit transactions, FASTag services, and onboarding of new customers.&nbsp;

Best Compliance Practices For Fintechs in India

The fintech segment in India has to comply with extensive regulatory and supervisory compliance requirements from various authorities such as the RBI and SEBI. Similar to Paytm, there are over <a href="https://www.cashfree.com/blog/fintech-companies-in-india/#:~:text=According%20to%20the%20reports3,amalgamation%20of%20finance%20and%20technology.">3,000 fintech firms in India.&nbsp;</a>

However, to ensure that they don’t experience the same restrictions as Paytm, here are some of the best compliance practices to consider.

Since the Paytm Payments bank, customers and merchants have been forced to look at alternatives. However, the platform or institution they choose must have ideal policies and frameworks to ensure seamless RBI compliance.&nbsp;

Similarly, with international payments, you need a platform that complies with RBI guidelines to ensure you receive payouts smoothly. Skydo is one such platform that facilitates international payments while staying true to all RBI regulations. Here’s how it works.

How Skydo Ensures Seamless RBI Compliance? 

Skydo ensures effective compliance through the following features and policies.

Skydo ensures effective compliance with industry regulations as it follows guidelines set by the Reserve Bank of India (RBI) under the OPGSP framework. RBI has set <a href="https://www.skydo.com/blog/pacb-circular-and-opgsp-update">guidelines</a> related to Online Payment Gateway Service Providers (OPGSPs) and their arrangements with Authorised Dealer (Category I) Banks.&nbsp;

Skydo constantly monitors the RBI framework to regulate its operations and ensure it follows the RBI’s OPGSP guidelines.&nbsp;

A <a href="https://www.skydo.com/blog/importance-of-fira-for-freelancers?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Foreign Inward Remittance Advice (FIRA)</a> is a document issued by Indian banks to Indian beneficiaries who receive foreign remittances into their bank accounts. Skydo offers Automated Digital FIRA, where the document is automatically generated immediately when you receive foreign funds in your virtual Skydo account. This saves time and ensures you are GST-compliant with every completed transaction.&nbsp;

Furthermore, when you execute an international transaction on Skydo, your <a href="https://www.skydo.com/blog/what-is-purpose-code-and-why-is-it-required?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">purpose codes</a> are automatically saved and seamlessly integrated into your invoices. This allows effective regulatory compliance, risk management, and transaction transparency.&nbsp;

For financial platforms and institutions, adequate KYC (Know Your Customers) and KYB (Know Your Business) processes are vital as penalties for flouting such processes by RBI are the most common.&nbsp;

<a href="https://www.skydo.com/?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=demo_click">Skydo</a> has created detailed yet quick KYC and KYB processes to prevent money laundering, terrorist financing, and other illicit activities.

Skydo monitors every transaction you execute through your virtual currency account and ensures there are no unusual activities, to maintain a safe and trustworthy environment.&nbsp;

Creating an account and executing transactions leave a data trail about the sender and the receiver. Skydo ensures the safety of your money, data, and client/business information through top-grade encryption.&nbsp;

<a href="https://www.skydo.com/blog/why-skydo-is-your-trusted-international-payment-partner?utm_source=blogs&amp;utm_medium=website&amp;utm_campaign=post_link">Skydo</a> keeps your data in a virtual safe, with an extra layer of security access. Furthermore, <a href="https://www.skydo.com/">Skydo</a> follows processes aligned with the new Data Protection Act to ensure your data is handled with the utmost care and in compliance with evolving regulations.

Financial Intelligence Unit - India (FIU-IND) is a national agency that receives, processes, analyses, and disseminates information relating to suspicious financial transactions. Skydo has registered with FIU-IND to report suspicious activity.

RBI has set guidelines and frameworks to protect customer data and money, and it should be the foremost priority of platforms and institutes to ensure their operations and processes comply with RBI guidelines.&nbsp;

For businesses, compliance helps in identifying and mitigating risks related to financial, operational, and reputational matters, safeguarding against potential losses and liabilities. It is crucial for fintechs or any other financial entities to adopt the best compliance practices to avoid regulatory scrutiny.&nbsp;