The government increases scrutiny of international transactions over Rs 50,000 and refers to money laundering regulations

A significant change to the Prevention of Money Laundering (Maintenance of Records) Rules, 2005 has been made in an attempt to improve control of foreign transactions above Rs 50,000. This substantial legal change, which the government has applauded, aims to strengthen measures against people or organizations involved in dubious financial transactions, especially those connected to funding terrorism.

With the passage of this ground-breaking announcement, all overseas transactions above the Rs 50,000 mark would be subject to a thorough review procedure. According to The Economic Times, should any transaction raise suspicions, the involved firm would be required to prove their identification and offer detailed details about the nature of their commercial operations.

The notice requires reporting institutions to carefully protect the information they have obtained and to avoid notifying or tipping off any parties who may be involved.

The notice states that “Every reporting entity shall…identify its clients, authenticate their identities using credible and independent means of verification, procure pertinent details regarding the purpose and intended scope of the business relationship, where applicable, and take reasonable measures to comprehend the nature of the customer’s business, ownership, and control,” according to The Economic Times.

TCS Rates Changed for International Transfers Under LRS

In a related move, the government raised the Tax Collection at Source (TCS) rate on transfers made under the Liberalised Remittance Scheme (LRS) and the purchase of packages for international trip programs from 5 to 20 percent.

“The Rs 7 Lakh per financial year per individual threshold specified in clause (i) of sub-section (1G) of section 206C shall be reinstated for TCS on all categories of LRS payments, regardless of the mode of payment or purpose,” the Union Ministry of Finance said. Therefore, there won’t be any TCS applied on LRS payments up to Rs 7 lakh. TCS will be 0.5 percent (in the case of remittances for education sponsored by an education loan), 5 percent (for remittances for education/medical treatment), and 20 percent for other reasons over this Rs 7 Lakh level.