Government introduces 20% TCS on using credit card outside India

In a late-night notification, the central government, in collaboration with the Reserve Bank of India, has introduced an amendment that will impose a 20 percent tax collection at source (TCS) on credit card usage outside India. The finance ministry stated that the amendment to the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 will incorporate international credit card payments within the scope of the Liberalised Remittance Scheme (LRS), effective from July 1. The notification specifically highlights the omission of rule 7 from the Foreign Exchange Management (Current Account Transactions) Rules, 2000. This change now encompasses the utilization of international credit cards for meeting expenses during visits outside India under the LRS. With immediate effect, the notification brings credit card transactions conducted outside India under the purview of the LRS, facilitating the implementation of the higher TCS levy, as outlined in the 2022-23 Budget, commencing from July 1. It is important to note that previously, the use of credit cards for foreign expenditures during travel was not included under the LRS. The scheme had previously covered debit cards, forex cards, and bank transfers. In summary, starting from July 1, any expenditures made using international credit cards will be subject to a higher tax collection at source (TCS) rate of 20 percent. This change arises from the inclusion of credit card transactions conducted outside of India under the scope of the Liberalised Remittance Scheme (LRS), resulting in an elevated TCS levy. Until July 1, a TCS of 5 percent will be imposed on such transactions, excluding those in the medical and education sectors. However, from July 1 onwards, all such transactions will be subject to a 20 percent TCS. It is important to note that the LRS scheme allows Indian residents to remit up to $250,000 (approximately over Rs 2 crore) per year without requiring prior approval from the Reserve Bank of India. Previously, the use of international credit cards by Indians during foreign trips or for international online purchases was not considered when calculating the overall LRS limit of $250,000 per person in a financial year. However, it appears that the recent notification now allows international credit card transactions to be taken into account for determining the limit of $250,000 under the LRS. Read all the Latest News, Trending News,  Cricket News, Bollywood News, India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.