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The Ministry of Finance on Friday said it decided that any payments by an individual using their international debit or credit cards upto Rs seven lakh per financial year will be excluded from the RBI's Liberalised Remittance Scheme (LRS) limits and hence, will not attract any Tax Collected at Source (TCS).
The clarification comes after some concerns were raised about the applicability of Tax Collection at Source (TCS) to small transactions under the Liberalized Remittance Scheme (LRS) effective July 1, 2023. Existing beneficial TCS treatment for education and health payments will also continue. Earlier on Thursday, Tax Collected at Source (TCS) for spending through international credit cards under RBI's Liberalised Remittance Scheme on overseas tour packages and any other remittance (such as for bonds, shares, and real estate gifts) was exempted within the annual limits of USD 250,000. TCS for these cases, when it crosses USD 250,000 per fiscal, will be now at 20 per cent from July 1, against the earlier 5 per cent. The Finance Ministry said the changes were necessitated as some instances have come to notice where the LRS payments were "disproportionately high" when compared to the disclosed incomes.The new rules under LRS doesn't change anything except bringing parity between the usage of debit and credit cards abroad. By bringing TCS on credit card under LRS, the government aims at plugging the loophole. Earlier, expenditures through credit cards were not accounted for under the specified LRS limit, which had led to some individuals exceeding the annual limits. The differential treatment between debit cards and credit cards is sought to be removed through the changes. Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April - March) for any permissible current or capital account transaction or a combination of both.
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