NEW DELHI: Foreign exchange spending on personal expenses like gift, medical treatment through international credit cards will now be covered under the Reserve Bank of India’s liberalised remittance scheme (LRS), according to the Finance Ministry notification.
Under LRS, a resident can remit money abroad up to a maximum of $2.5 lakh per annum without RBI’s approval. Till now, payments made via international credit cards towards meeting personal expenses during foreign tours were exempt.
The government on May 16 notified the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023, to include credit card payments in the LRS scheme. “The notification by the Ministry of Finance relating to Foreign Exchange Management (Current account transaction) rules will have a far-reaching impact on foreign exchange transactions by foreign travelers while abroad.
Rule 7 of the above rule has been now deleted, leading to withdrawal of exemptions available earlier relating to the personal expenses by travellers while being abroad via international credit cards,” said Jyoti Prakash Gadia, MD at Resurgent India. The government in the Union Budget 2023-24 had also raised tax collection at source (TCS) rates to 20% from 5%, on overseas tour packages and funds remitted under LRS. However, this doesn’t include remittances made for education and medical purposes.
“This amendment not only curtails remittances an individual can make but could cast additional cost of 20% on remitter in the form of TCS. The Finance Act, 2023, had raised TCS rates on remittances made other than for education and medical purposes to 20%,” Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP said. “...This will impose restrictions on foreign travel expenses while an individual is abroad and aimed at scrutiny and conversation of such expenses,” Gadia added.