Editor
In response to concerns and backlash regarding the 20 percent Tax Collection at Source (TCS) imposed on overseas credit and debit card spending, the government clarified on May 19 that payments made by individuals using international cards up to Rs 7 lakh per financial year will be exempted from the TCS requirement.
The Ministry of Finance stated, "To address concerns regarding small transactions under the Liberalized Remittance Scheme (LRS) from July 1, 2023, it has been decided that any individual payments using international debit or credit cards up to Rs 7 lakh per financial year will be excluded from the LRS limits and will not attract any TCS."
The ministry also confirmed that the existing beneficial TCS treatment for education and health payments will continue.
Separate amendments to the Rules (Foreign Exchange Management (Current Account Transactions Rules), 2000) will be issued to incorporate these changes, the ministry added.
On May 16, the ministry had notified the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023, bringing spending in foreign exchange through international credit cards under the Reserve Bank of India's liberalized remittance scheme (LRS).
All international transactions made using credit cards outside of India are now covered by the RBI's LRS, which allows Indian residents to send up to $250,000 abroad in a financial year without prior approval from the central bank. This change took effect on May 16, 2023, as per the Ministry of Finance's notification in the Gazette of India.
Consequently, any credit card spends exceeding Rs 7 lakh will now be subject to a 5 percent tax collected at source (TCS) until June 30, 2023. Starting July 1, 2023, these credit card transactions will attract a higher TCS rate of 20 percent with no minimum threshold, further exacerbating the situation.