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    No Tcs On Lrs Transactions Upto Rs 7 Lakh Via International Debit, Credit Cards

    No Tcs On Lrs Transactions Upto Rs 7 Lakh Via International Debit, Credit Cards


    In the Union Budget 2023, the government announced that international credit card expenses would be subject to a higher TCS rate of 20 percent, effective from July 1.

    The government has on Friday relaxed the rules that mandated 20 percent Tax Collected At Source (TCS) on international transactions using debit or credit cards. It said that any international transaction done by an individual using his/her debit or credit card upto Rs 7 lakh will not attract the 20 percent levy. Such transactions, the government has clarified, will be exempt from the $250,000 per annum Liberalised Remittance Scheme (LRS) limits. This relaxation does not extend to international transactions charged to institutional or corporate credit cards.

    “To avoid any procedural ambiguity, it has been decided that any payments by an individual using their international Debit or Credit cards upto Rs 7 lakh per financial year will be excluded from the LRS limits and hence, will not attract any TCS,” an official statement said.

    “Existing beneficial TCS treatment for education and health payments will also continue,” it added.

    SC Garg, Former Secy, Finance said, “There was no reason for bringing international credit card spending under the Liberalised Remittance Scheme (LRS). The original 20 percent was also unjustified. It is good that the government has now withdrawn the credit card from LRS. It is also advisable that the government also rationalises the policy on the LRS transfers.”

    However, this relaxation shall not be available for any remittances made from India. “The relaxation from TCS has been given only for overseas spending using International Debit or Credit cards if the threshold limit of Rs 7 lakhs per financial year is not breached. This relaxation shall not be available for any remittances made from India. Thus, any remittance for investment, ticket booking, purchase of goods, payment of subscription fees, etc., shall continue to be subject to TCS at 20 percent,” Naveen Wadhwa, DGM, Taxmann said.

    The relaxation comes after the government’s earlier decision to include all international credit card transactions under the LRS limit, and make a 20 percent TCS on such transactions mandatory caused a lot of confusion among users. There was also concern that such a levy would make international transactions like foreign travel more expensive.

    The government has also clarified that this relaxation will avoid any procedural ambiguity that may have arisen from the earlier amendments to the Foreign Exchange Management Act (FEMA). The existing beneficial TCS treatment for education and health payments will continue as is.

    It is worth noting that in the Union Budget 2023, the government announced that international credit card expenses would be subject to a higher TCS rate of 20 percent, effective from July 1.

    Under the LRS scheme, the RBI allows residents to spend funds abroad up to the specified ceiling for investment and expenditure, including travel, education, medical treatment and buying securities and physical assets.

    However, all other transactions which are otherwise not permissible under FEMA and those in the nature of remittance for margins or margin calls to overseas exchanges/overseas counterparty are not allowed under the scheme.



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