Overseas Spending Using Credit Cards Won't Attract Tax Collected At Source: Govt
TCS New Rule: The government has given more time for implementation of revised TCS rates and it will apply from October 1.
The Centre on Wednesday said there would be no change in rate of Tax Collection at Source (TCS) for all purposes under LRS (Liberalised Remittance Scheme) and for overseas travel tour packages, regardless of the mode of payment, for amounts up to Rs 7 lakh per individual per annum.
The government also said that overseas spending using International Credit Cards (ICC) would not be included under the Liberalised Remittance Scheme and hence, would not attract TCS.
Moreover, the implementation of a higher rate of tax collected at source of 20 per cent on overseas remittances under LRS, like tour expenses, will now come into effect from October 1 instead of July 1.
However, credit card spends overseas will not attract TCS from October 1.
On May 16, the Finance Ministry, through a notification, announced that International Credit Cards (ICC) used for spending outside India will be put under the aegis of the Liberalised Remittance Scheme (LRS), which will cause such cards to attract a higher tax collected at source (TCS) at 20 per cent.
READ | After Backlash, Govt Clarifies International Credit Card Spend Under RBI LRS Limit
The change was announced during the Budget 2023-24. The government had announced to hike TCS rates to 20 per cent, from the current 5 per cent, on overseas tour packages and funds remitted under LRS (other than for education and medical purposes).
During an overseas trip, a person can use international debit cards, international credit cards, or other methods for making transactions.
Although payments by debit cards were covered under the LRS, expenditures through credit cards were not accounted for under the specified LRS limit. This had led to some individuals exceeding the LRS limits, the Finnace Ministry had said.
Data from top money remitters under LRS also revealed that international credit cards were being issued with limits in excess of the present LRS limit of $ 2.50 lakh.
Under the RBI's LRS scheme, an individual can remit up to $ 2.5 lakh annually overseas without the approval of the RBI. Remittances beyond $2.5 lakh or its equivalent in foreign currency will require RBI nod.
Remittances under Liberalised Remittance Scheme (LRS) witnessed a significant increase in recent years.
According to PTI, the total remittance amount surged from $12.68 billion in 2020-21 to $19.61 billion in 2021-22. In 2022-23, the remittance amount exceeded $24 billion, with overseas travel contributing to over half of the total remitted funds.
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