NEW DELHI: International credit card spends under the liberalised remittance scheme (LRS) would not subject to tax collection at source (TCS) for now, the finance ministry said Wednesday.
Last month, the Centre had announced the inclusion of international credit card payments under the liberalised remittance scheme (LRS).
“To give adequate time to banks and card networks to put in place requisite IT-based solutions, the government has decided to postpone the implementation of its May 16, 2023, e-gazette notification.
This would mean that transactions through international credit cards while being overseas would not be counted as LRS and hence would not be subject to TCS,” the ministry said.
In addition, the new increased TCS rates, which were to be implemented from July 1, will now come into effect from October 1, 2023. In the Union Budget 2023, the government increased TCS on foreign remittance through LRS to 20% from the existing 5% on the purchase of overseas tour program packages and for other purposes. It had not made any changes to TCS rates on education financed by loans and for medical treatment in LRS. The old TCS rates will be applicable till September 30, 2023.
Further, the threshold of Rs 7 lakh per financial year per individual will be restored for TCS on categories of LRS payments, through all modes of payment, regardless of the purpose. “Thus, the first Rs 7 lakh remitted under LRS will not be subject to TCS.
Beyond this, TCS will be 0.5% (if remittance for education is financed by education loan); 5% (in case of remittance for education/medical treatment); and 20% for others,” the release said. For the purchase of overseas tour packages, the TCS will continue to apply at the rate of 5% for the first Rs 7 lakh per individual per annum; the 20% rate will only apply for expenditures above this limit. Under LRS, one can remit up to $250,000 out of the country. “TCS on overseas spends under LRS is itself flawed as these taxes are not on income. For the audit trail, the rates should be brought down to 1-5%. TCS at 20% in certain cases is too high,” said Ved Jain, a New Delhi - based chartered accountant.