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[India] Foreign VPS, Domains, Cloud etc. to become more expensive 20% TCS starting July 1st 2023?
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[India] Foreign VPS, Domains, Cloud etc. to become more expensive 20% TCS starting July 1st 2023?

There were some changes announced on Feb 1 2023 budget regarding outward remittances.

https://taxguru.in/income-tax/section-206-1g-tcs-outward-remittance-lrs-after-budget-2023.html

  • Previously: 5% of Remittance Amount in Excess of Rs. 7.00 Lacs during FY
  • Starting July 1 2023 - Flat 20% of Remittance Amount

If I understand this correctly, for example: if we buy Hetzner AX41-NVMe for € 37.30. Apart from exchange rate, payment processor charges, GST, we would be charged € 7.46 by the bank as TCS which we can verify in Form 26AS?

Thoughts? I think foreign service providers might lose Indian customers as they might end up preferring Indian service providers now.

Thanked by 1Abd
«13

Comments

  • TrKTrK Member
    edited February 17

    Remittance != POS Payment
    And not to mention the slabs would be different for different use cases, FYI the remittance was always taxable.

    Thanked by 1kkrajk
  • AbdAbd Member, Patron Provider
    edited February 17

    @TrK said:
    Remittance != POS Payment
    And not to mention the slabs would be different for different use cases, FYI the remittance was always taxable.

    Banks are required to collect TCS on card payments in foreign currencies 🙁
    Edit: not all banks comply, I only know federal, ICICI & dbs bank doing this automated tax deduction .

  • varwwwvarwww Member
    edited February 17

    @TrK said: Remittance != POS Payment. And not to mention the slabs would be different for different use cases, FYI the remittance was always taxable.

    I am talking about outward remittance (expenses. includes POS like Paypal?). From https://timesofindia.indiatimes.com/business/budget/from-studying-abroad-to-holidaying-overseas-how-foreign-remittance-will-be-taxed-from-july-1/articleshow/97713626.cms

    This increase in TCS will include payments towards tours, for buying currency for travel, making any gifts or loans to relatives abroad, purchasing any property abroad or even for buying foreign stocks. Even a person who is immigrating abroad and wishes to remit his funds to his bank abroad would not be spared from the levy of 20%.

    This means that if you transfer money outside India for any purpose other than health or education, 20%of the amount will be withheld by the bank and deposited under your name with the government.

  • TrKTrK Member

    @Abd said:

    @TrK said:
    Remittance != POS Payment
    And not to mention the slabs would be different for different use cases, FYI the remittance was always taxable.

    Banks are required to collect TCS on card payments in foreign currencies 🙁

    I agree that they would require the TCS but not 20% of the amount unless it's crossing the certain threshold, i am no tax expert but i haven't paid any remittance fee on my card payments till now, i agree there was some exchange fee with tax included but that too didn't came any way near 5%.

    Thanked by 1Abd
  • TrKTrK Member
    edited February 17

    @varwww said:

    @TrK said: Remittance != POS Payment. And not to mention the slabs would be different for different use cases, FYI the remittance was always taxable.

    I am talking about outward remittance (expenses. includes POS like Paypal?). From https://timesofindia.indiatimes.com/business/budget/from-studying-abroad-to-holidaying-overseas-how-foreign-remittance-will-be-taxed-from-july-1/articleshow/97713626.cms

    This increase in TCS will include payments towards tours, for buying currency for travel, making any gifts or loans to relatives abroad, purchasing any property abroad or even for buying foreign stocks. Even a person who is immigrating abroad and wishes to remit his funds to his bank abroad would not be spared from the levy of 20%.

    This means that if you transfer money outside India for any purpose other than health or education, 20%of the amount will be withheld by the bank and deposited under your name with the government.

    Well your title said Domains, VPS and cloud and that is no way related to this new tax regime i mean PayPal is not only a remittance provider but a payment gateway as well, and i guess no company will ask you to send them money as remittance for their services it would count as a commercial POS transaction.

  • @TrK said: unless it's crossing the certain threshold

    That threshold of 7 lakhs INR no longer exists according to the new budget? Any chartered accountant here from India to confirm this?

    Thanked by 1kkrajk
  • TrKTrK Member

    @varwww said:

    @TrK said: unless it's crossing the certain threshold

    That threshold of 7 lakhs INR no longer exists according to the new budget? Any chartered accountant here from India to confirm this?

    I am not an accountant but if you had read the post which you have linked in your first message carefully you would have known that it's still there and for simpler interpretation check the last table for Mr Y on that page.

  • AbdAbd Member, Patron Provider
    edited February 17

    @TrK said:

    @Abd said:

    @TrK said:
    Remittance != POS Payment
    And not to mention the slabs would be different for different use cases, FYI the remittance was always taxable.

    Banks are required to collect TCS on card payments in foreign currencies 🙁

    I agree that they would require the TCS but not 20% of the amount unless it's crossing the certain threshold, i am no tax expert but i haven't paid any remittance fee on my card payments till now, i agree there was some exchange fee with tax included but that too didn't came any way near 5%.

    Yes that is the fx conversion fee ig
    my experience with Federal bank they started deducting 5% tcs automatically (in addition to fx fee) after my transactions exceeded 7L for that year.

    Thanked by 1kkrajk
  • TrKTrK Member

    For the limit OP asked(i.e. 700000) it's still there but it was and still is limit for medical expenses.The Tours and such will still cost you 20% of remittance account collected by either remittance provider or the seller. Note: The remittance Tax thing is applicable for non-commercial transactions.

  • TrKTrK Member
    edited February 17

    @Abd said:

    @TrK said:

    @Abd said:

    @TrK said:
    Remittance != POS Payment
    And not to mention the slabs would be different for different use cases, FYI the remittance was always taxable.

    Banks are required to collect TCS on card payments in foreign currencies 🙁

    I agree that they would require the TCS but not 20% of the amount unless it's crossing the certain threshold, i am no tax expert but i haven't paid any remittance fee on my card payments till now, i agree there was some exchange fee with tax included but that too didn't came any way near 5%.

    Yes that is the fx conversion fee ig
    my experience with Federal bank they started deducting 5% tcs automatically (in addition to fx fee) after my transactions exceeded 7L for that year.

    That's what i said, the said charges would only occur after we cross the certain threshold, but before we hit the threshold it should be the same as usual unless i am missing something. Come to think of it I don't get charged for fx fee with my federal account, and i believe the banks would start sending us notices for fee changes before they implement it.

  • leapswitchleapswitch Member, Patron Provider

    Why not move your servers to Indian providers :smile: ?

  • @leapswitch said:
    Why not move your servers to Indian providers :smile: ?

    18% GST uwu

  • @Abd said:

    @TrK said:
    Remittance != POS Payment
    And not to mention the slabs would be different for different use cases, FYI the remittance was always taxable.

    Banks are required to collect TCS on card payments in foreign currencies 🙁
    Edit: not all banks comply, I only know federal, ICICI & dbs bank doing this automated tax deduction .

    Have seen HDFC and PayTM cards complying to this

  • kuroitkuroit Member, Patron Provider

    That explains the outrageous TCS payments on our bank statements! :s

    5% to 20% in one shot, I guess time to make some amendments now.

  • TrKTrK Member

    @kuroit said:
    That explains the outrageous TCS payments on our bank statements! :s

    5% to 20% in one shot, I guess time to make some amendments now.

    It will be WEF from the july, it should be still 5% till then, the outrageous TCS might be something else would be better to check it with the bank just in case.

  • kuroitkuroit Member, Patron Provider

    @TrK said:

    @kuroit said:
    That explains the outrageous TCS payments on our bank statements! :s

    5% to 20% in one shot, I guess time to make some amendments now.

    It will be WEF from the july, it should be still 5% till then, the outrageous TCS might be something else would be better to check it with the bank just in case.

    CA already looking into it, I'll also contact the bank for clarification ;)

  • TrKTrK Member

    @jmaxwell said:

    @Abd said:

    @TrK said:
    Remittance != POS Payment
    And not to mention the slabs would be different for different use cases, FYI the remittance was always taxable.

    Banks are required to collect TCS on card payments in foreign currencies 🙁
    Edit: not all banks comply, I only know federal, ICICI & dbs bank doing this automated tax deduction .

    Have seen HDFC and PayTM cards complying to this

    Almost every banks charge TCS on card payments but the things are different for the calculations for example one of my bank charges flat 2% as the fx and TCS fee combined while my another bank charges me around 3% for the same and one of my banks charges 0% for the same, although i have no idea why it is like that but apparently the only thing i can understand is everything should be fine unless the payment falls into the mentioned slabs and/or cross a certain threshold.

  • TrKTrK Member

    @leapswitch said:
    Why not move your servers to Indian providers :smile: ?

    Outrageous GST, poor routing, costly and old hardware and did i mention the lack of ipv6 with most of the providers. I forgot to mention heavy import duties for latest hardware.

    Thanked by 1fart
  • TrKTrK Member

    @kuroit said:

    @TrK said:

    @kuroit said:
    That explains the outrageous TCS payments on our bank statements! :s

    5% to 20% in one shot, I guess time to make some amendments now.

    It will be WEF from the july, it should be still 5% till then, the outrageous TCS might be something else would be better to check it with the bank just in case.

    CA already looking into it, I'll also contact the bank for clarification ;)

    Sounds like a plan, please do share the findings to help others if they are facing something like the same.

  • varwwwvarwww Member
    edited February 18

    @leapswitch said:
    Why not move your servers to Indian providers :smile: ?

    I used to support local and buy *.in domains and buy hosting from India several years back but now I do not for several reasons.

    • Price and bandwidth is too expensive in India - Assume you do now own leapswitch. Which provider will you buy from https://www.hetzner.com/cloud and https://leapswitch.com/frankfurt-germany/unmanaged-vps-hosting/linux.php
    • Sites get randomly blocked (even genuine important ones) due to Govt orders. curl requests start failing due to this.
    • Latency issues, random downtimes, poor routing. Had experienced this when using DigitalOcean Bangalore when it was launched. (I don't know about how it is now).
    • .in domains - No whois privacy. Nixi, the registry for .in domains, requires registrants to email [email protected] for written approval to register more than 2 .in domains (for individual registrants) or more than 100 .in domains (for businesses and organizations). Without this approval, the registry may delete the extra domains without letting the registrant know. Refer https://internetfreedom.in/nixis-domain-cap/ and https://support.google.com/domains/answer/6296356?hl=en
    • India Requires Internet Services to Collect and Store Vast Amount of Customer Data, Building a Path to Mass Surveillance. CERT-IN i.e Computer Emergency Response Team, India issued new guidelines on 28th April 2022. Guidelines essentially ask those VPN providers to keep a log of customer details, their IP addresses, emails, phone numbers etc and maintain that log for at least 5 years. This not only extends to VPN players but also to datacenters, VPS, cloud service providers etc. https://www.cert-in.org.in/PDF/CERT-In_Directions_70B_28.04.2022.pdf
    Thanked by 2fart _MS_
  • WindsOfChangeWindsOfChange Member
    edited March 7

    Are you saying that business to business payment to suppliers will qualify for a 20% TCS, if total annual payment across all suppliers exceeds 700000 inr/year?

    TCS will be refundable if your total annual tax is lower than TCS paid. Essentially it's a interest cost till you get the refund?

    This will be applicable on Business Credit Cards or Personal credit cards?

  • @leapswitch said:
    Why not move your servers to Indian providers :smile: ?

    So you use ESDS / SIFY / CtrlS?

  • suutsuut Member

    Will this affect Indian provider prices?

  • varwwwvarwww Member

    @kuroit said:

    @TrK said:

    @kuroit said:
    That explains the outrageous TCS payments on our bank statements! :s

    5% to 20% in one shot, I guess time to make some amendments now.

    It will be WEF from the july, it should be still 5% till then, the outrageous TCS might be something else would be better to check it with the bank just in case.

    CA already looking into it, I'll also contact the bank for clarification ;)

    Hey, any update ? :)

  • leapswitchleapswitch Member, Patron Provider

    @sreekanth850 said:

    @leapswitch said:
    Why not move your servers to Indian providers :smile: ?

    So you use ESDS / SIFY / CtrlS?

    We don't use these datacenters but we colocate in multiple Tier 4 and Tier 3 datacenters in Mumbai, Pune and Delhi. We run our own network, servers and have our own staff in each datacenter.

  • leapswitchleapswitch Member, Patron Provider

    @varwww said:

    @leapswitch said:
    Why not move your servers to Indian providers :smile: ?

    I used to support local and buy *.in domains and buy hosting from India several years back but now I do not for several reasons.

    Not everyone needs/uses that much bandwidth. Yes bandwidth is more expensive in India but prices have come down almost 3x in the past 2 years. Doesn't Jio offer the cheapest consumer 4G/5G bandwidth in the world? 🙂

    Host your websites/applications in India if they are targeted towards Indian users, they will see a vast difference in performance and stability.

    Every other month India <> Europe connectivity goes for a toss due to some cable cuts.

    • Sites get randomly blocked (even genuine important ones) due to Govt orders. curl requests start failing due to this.

    Wouldn't this be the case outside India as well for users within India?

    • Latency issues, random downtimes, poor routing. Had experienced this when using DigitalOcean Bangalore when it was launched. (I don't know about how it is now).

    Cannot really comment on this as we run a different/separate network. ( 4th largest by number of peers in India - https://bgp.tools/rankings/IN?sort=peering )

    This is indeed a weird rule tbh. Their intentions are good ( prevent fraudulent websites ) but implementation is quite poor.

    • India Requires Internet Services to Collect and Store Vast Amount of Customer Data, Building a Path to Mass Surveillance. CERT-IN i.e Computer Emergency Response Team, India issued new guidelines on 28th April 2022. Guidelines essentially ask those VPN providers to keep a log of customer details, their IP addresses, emails, phone numbers etc and maintain that log for at least 5 years. This not only extends to VPN players but also to datacenters, VPS, cloud service providers etc. https://www.cert-in.org.in/PDF/CERT-In_Directions_70B_28.04.2022.pdf

    Many countries have similar requirements. I have read about Hetzner and OVH doing KYC before providing servers.

  • leapswitchleapswitch Member, Patron Provider

    @TrK said:

    @leapswitch said:
    Why not move your servers to Indian providers :smile: ?

    Outrageous GST, poor routing, costly and old hardware and did i mention the lack of ipv6 with most of the providers. I forgot to mention heavy import duties for latest hardware.

    Each country in Europe charges 18-24% VAT. How is 18% GST high?

    IPv6 is available with most Indian providers/datacenters and all Indian ISPs.

    Latest generation hardware is available with Indian vendors with official warranty, no need to import. Our dedicated servers with Intel Gold (2nd Gen) and AMD EPYC (2nd/3rd Gen) are lower than popular EU/USA providers.

    Power prices in India are less than half of what we are paying in Europe.

  • BingoBongoBingoBongo Member
    edited March 7

    @leapswitch said:

    @TrK said:

    @leapswitch said:
    Why not move your servers to Indian providers :smile: ?

    Outrageous GST, poor routing, costly and old hardware and did i mention the lack of ipv6 with most of the providers. I forgot to mention heavy import duties for latest hardware.

    Each country in Europe charges 18-24% VAT. How is 18% GST high?

    IPv6 is available with most Indian providers/datacenters and all Indian ISPs.

    Latest generation hardware is available with Indian vendors with official warranty, no need to import. Our dedicated servers with Intel Gold (2nd Gen) and AMD EPYC (2nd/3rd Gen) are lower than popular EU/USA providers.

    Power prices in India are less than half of what we are paying in Europe.

    You can't convince every uneducated people on Internet.

    He said "Sites get randomly blocked by govt"

    None of my sites never got any issues because of Govt.

    And I have/had multiple websites since 2005/6 I think.

    So only he knows what content he host on his websites that govt of a large country want to block them.

    :lol: :lol:

  • opiqopiq Member
    edited March 7

    @leapswitch said: Each country in Europe charges 18-24% VAT. How is 18% GST high?

    because with the same tax % they have one of the most sought out countries to live in, while India is....well....still India, even though it has one of the cheapest $/GB bandwidth costs (for end consumers)

    the point is not how much a country's GST is, but rather what they are doing with it (efficiency). and to answer your question, 18% is high considering the returns you get.

    Thanked by 1Luke007
  • TrKTrK Member
    edited March 7

    @leapswitch said:

    @TrK said:

    @leapswitch said:
    Why not move your servers to Indian providers :smile: ?

    Outrageous GST, poor routing, costly and old hardware and did i mention the lack of ipv6 with most of the providers. I forgot to mention heavy import duties for latest hardware.

    Each country in Europe charges 18-24% VAT. How is 18% GST high?

    IPv6 is available with most Indian providers/datacenters and all Indian ISPs.

    Latest generation hardware is available with Indian vendors with official warranty, no need to import. Our dedicated servers with Intel Gold (2nd Gen) and AMD EPYC (2nd/3rd Gen) are lower than popular EU/USA providers.

    Power prices in India are less than half of what we are paying in Europe.

    You can't compare the currency of our India with the EU and US, the per capita income is way lower, and an average wage earner is earning shills, Each country in "EU" have the VAT and in return they have some great laws to consolidate and justify their taxation while indian Taxation is a big headache, and i do mean the GST for businesses might be a great thing but for a consumer it's just outrageous. Latest Generation hardware cheaper with indian vendors then EU/US vendors? Idk but i want what you are smoking bro, what if i want to purchase something that's not in bulk amount? any reasonable pricing? now you will say there is import, transportation, tax, excise, vendor revenue, etc but bro in no way i can find something here than the EU/US, you can try i have lost my wraith prism cooler cable can you help me find it for cheaper? if yes then please do DM me. Now as for your last point the power prices, i don't know what power company charges what but "torrent" is no way cheaper than any other, have you imaginesa so called customer support associate in india earns around 15-20K month and the electricity charges for his 1BHK apartment will still cost him more than 2K(atleast with torrent) and without any air conditioning at that just a computer, TV, fans, fridge, lights, and other appliances. As for IPv6 it's not all and most it's only the big ISPs generally having the category A license, or maybe some Category B license holders as well, but they can't represent the all ISPs in India.

    PS: I don't want to make this thread a political warfare in india but everything is just not same as a business believes it be.

    Thanked by 2sh97 Luke007
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