NEW DELHI: The government will come up with clarifications related to the 20% tax collected at source (TCS) imposed on the use of credit cards for overseas transactions, Raman Chopra, joint secretary, department of Revenue, ministry of Finance, said on Friday.
“Change was brought about in the February budget, TCS legislation will kick in from July 1. There has been a lot of discussion on this. Everybody is aware of the issue. We will come up with FAQs on what, how, and in which manner TCS will be collected,” Chopra said at the Confederation of Indian Industries (CII) event.
Centre is facing criticism for levying a 20% tax on overseas credit card payments. Amid the kerfuffle, it gave some respite to small taxpayers by excluding payments using their international debit or credit cards up to Rs 7 lakh per annum from the liberalised remittance scheme or LRS limits.
“Concerns have been raised about the applicability of TCS on small transactions under LRS limits from July 1. To avoid procedural ambiguity, it has been decided any payments by an individual using international debit or credit cards up to Rs 7 lakh per financial year will be excluded from LRS limits and hence, will not attract TCS,” the Finance Ministry had said.
“The necessary changes to the Rules (Foreign Exchange Management (Current Account Transactions Rules), 2000) will be issued separately,” it stated. The RBI had introduced a new provision to bring overseas credit card spending under the LRS scheme, as per which individuals can do remittances of up to $2.5 lakh per annum. Following this, the finance ministry issued a notification saying such payments would attract 20% TCS that can be adjusted against advance tax payments or refunded at the time of return filing.