Back20% TCS on foreign remittances under LRS to roll out from July 1
The government has raised the TCS rate on foreign remittances under the LRS from 5 per cent to 20 per cent, effective1 July, 2023.
PremiumThe tax collected at source (TCS) charge on credit card usage outside India will roll out on 1July, 2023 said Department of Revenue Joint Secretary Raman Chopra.
As per notification, 20 per cent tax collection at source (TCS) charged on international credit card use outside India will be included under the liberalised remittance scheme (LRS).
The government had earlier brought overseas credit card spending under Liberalised Remittance Scheme (LRS). This meant that any spending using credit cards overseas would attract a 20 per cent tax from July 1. Debit card spending was already part of LRS.
The government has raised the TCS rate on foreign remittances under the LRS from 5 per cent to 20 per cent, effective1 July, 2023.
LRS is part of the Foreign Exchange Management Act (FEMA) 1999, which lays down the guidelines for outward remittance from India. It may be noted that all resident Indians are allowed to freely remit up to $250,000 dollar per financial year without informing the Reserve Bank of India.
It allows resident Indians to transfer funds abroad without restrictions, up to a specified limit. Recent developments, include the removal of an exemption for international credit card usage and clarifications regarding certain transactions, have brought changes in foreign remittances and their taxation.
After facing backlash, the government announced that no tax will be charged on overseas spending of up to ₹7 lakh in a year using debit or credit. Such transactions, the government has clarified, will be exempt from the $250,000 per annum LRS limits.
"To avoid any procedural ambiguity, it has been decided that any payments by an individual using their international Debit or Credit cards up to ₹7 lakh per financial year will be excluded from the LRS limits and hence, will not attract any TCS," the ministry said.
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