TCS Latest News: No 20% Tax on Overseas Credit Card Spends up to Rs 7 Lakh, Check More Details

The Finance Ministry has issued a clarification regarding the opposition to the decision of imposing a 20% tax collection at source (TCS) on credit or debit card payments made abroad.

According to the ministry, individuals who spend up to Rs 7 lakh overseas using their international credit or debit cards will be exempt from paying TCS. This means that expenses up to Rs 7 lakh have been excluded from the scope of the Reserve Bank of India’s (RBI) Liberalized Remittance Scheme (LRS).

The Finance Ministry stated, “Concerns have been raised regarding the applicability of Tax Collection at Source (TCS) for small transactions under the Liberalized Remittance Scheme (LRS) from July 1, 2023. In order to avoid any procedural ambiguity, it has now been prescribed that the amount spent by an individual using his international debit or credit card in a financial year up to Rs. 7 lakh has been excluded from the LRS limit, and hence TCS will not have to be paid on it.”

In a recent announcement, the Finance Ministry included expenses incurred abroad through international credit cards in the Liberalized Remittance Scheme (LRS) by notifying the Foreign Exchange Management Amendment Rules 2023. This step aimed to ensure that such expenses fall under the purview of Tax Collection at Source (TCS).

Card payments were not previously included in the scope of LRS.

Prior to this notification, international credit card payments for expenses incurred while traveling abroad were not eligible for the Liberalized Remittance Scheme (LRS). The Finance Ministry, in consultation with the Reserve Bank of India (RBI), issued a notification and removed section 7 of the Foreign Exchange Management Rules, 2000. Due to this amendment, payments made abroad through international credit cards also came under the ambit of LRS.

Implementation of New Tax Rate from July 1

Earlier this year, in the budget presented for the fiscal year 2023-24, the Tax Collected at Source (TCS) rate was increased from 5 percent to 20 percent. The new tax rate is going to be implemented from July 1, 2023. Under this revised tax rate, except for education and medical expenses, it has been stated that these rules will be applicable to foreign tour packages or other expenses under LRS.

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