NEW DELHI: After coming under criticism for levying a 20% tax on overseas credit card payments, the government on Friday announced that any payments by an individual using their international debit or credit cards up to Rs 7 lakh per annum would be excluded from the liberalised remittance scheme or LRS limits and will not attract any tax collection at source (TCS).
“Concerns have been raised about the applicability of TCS to small transactions under LRS limits from July 1, 2023. To avoid any procedural ambiguity, it has been decided that any payments by an individual using their international debit or credit cards up to Rs 7 lakh per financial year will be excluded from the LRS limits and hence, will not attract any TCS,” Finance ministry said in a statement.
Existing beneficial TCS treatment for education and health payments will also continue, it reiterated. Recently, the Reserve Bank of India (RBI) introduced a new provision to bring overseas credit card spending under the LRS scheme in which individuals can do remittances of up to USD 2.5 lakh per annum.
Following this, the Ministry of Finance also issued a notification saying that such payments would attract 20% TCS which can be adjusted against advance tax payments or refunded at the time of return filing.
Tax experts had raised concerns about the above changes saying that would create complexities, especially for middle-class individuals. This would also freeze their cash for nearly a year.
In addition, tour operators also criticised the centre’s move. Rajiv Mehra, Vice President of the Indian Association of Tour Operators (IATO) had written to the Prime Minister that the increase in TCS from 5% to 20% from 01 July 2023, will cause loss to the outbound tour operators based in India.
“The travellers would simply bypass the Indian operator and book outside. It would be a lose-lose situation for both the Government and the tour operators. This needs to be brought back to 5% as was before or even lower,” Mehra said.
Under the LRS, there is a limit of $250,000 that one can take out of the country for expenses overseas.
The government also levies TCS at varying rates for different categories of expenditures under LRS. The rate varies from 0.5% to 20%.