The implementation of Form 12BAA marks a significant step toward tax transparency and financial support for families, facilitating easier TCS recovery and financial management in overseas education financing.
The newly introduced Form 12BAA enables parents to claim Tax Collected at Source (TCS) credits on funds they remit for their children’s overseas education, effective from October. This significant update allows parents, rather than only the student, to recover TCS paid on remittances, broadening financial relief options for families supporting studies abroad.
Previously, only the child studying abroad could apply for a TCS refund on remitted funds. With Form 12BAA, parents can now include the TCS amount in their tax returns, allowing it to be offset against their taxes. This update also permits individuals traveling abroad to claim TCS refunds, extending benefits to a wider group.
- Aligned with the 2024 central budget, Form 12BAA also streamlines the process of setting off Tax Deducted at Source (TDS) and TCS amounts, supporting tax compliance on various income sources beyond salary
- Taxpayers must disclose TDS and TCS details on income from non-salary sources like fixed deposits, insurance policy commissions, share dividends, and applicable Goods and Services Tax on large purchases or foreign exchange
When a parent sends over ₹7 lakh in a year for a child’s studies abroad, a 5% TCS is typically applied to the amount. To claim this credit, taxpayers must submit a declaration to the tax collection authority detailing the institution or bank responsible for collecting the TCS. The declaration must specify that the TCS credit should be allocated to a different PAN, providing clarity and traceability.
The claim also requires essential identification details, including the name, address, and proof of identity of both the remitter and the individual claiming the credit, along with the PAN of the recipient. Additionally, the remittance amount must be categorized as either education or travel expenses, ensuring transparency.
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