Mumbai (Maharashtra) [India], May 25: The foreign exchange Industry has expressed serious concerns about the applicability of 20 per cent Tax Collection at Source (TCS) under the Liberalized Remittance Scheme (LRS) effective from July 1, 2023. On 19th May, 2023, Ministry of Finance clarified that transactions conducted overseas using debit and credit cards would be exempted from TCS up to a small value of Rs 7 lacs per financial year. However, there was no specific clarification provided regarding small value transactions involving Foreign Currency Cash, Wire Transfers through Banks, Prepaid Forex Cards, and other International payment options widely used by individuals during overseas trips for leisure or employment. The All India Association of Authorized Money Changers & Money Transfer Agents have submitted a representation to the finance ministry regarding the aforementioned concerns.
Bhaskar Rao P, General Secretary of The All India Association of Authorised Money Changers & Money Transfer Agents, said, "The money exchange industry expects the government to ensure a level playing field for all overseas transactions with small values of Rs 7 lakhs, regardless of the instrument used. Common people utilize foreign currency cash (up to the maximum of USD 3000), prepaid Forex Travel Cards, and wire transfers, while the upper class uses international debit and credit cards."
According to the immigration data published by DGCA, more than 60 percent of overseas travelers are first time flyers. These people are from the economically weaker section from the bottom of the pyramid who are less educated, who do not hold debit or credit cards and hence deserve parity with the debit and credit card holders. The notification will directly impact individuals travelling abroad for employment especially the labour/working class, who generally belong to the low-income group and are ineligible for credit cards. These travelers generally procure foreign exchange in the form of cash or prepaid card from money exchange outlets operating at international airports or city outlets. The imposition of 20 per cent TCS will have a major impact on them as they do not fall under the income tax bracket.
With the relaxation given for Credit and Debit cards, the upper middle class & rich customers will be able to avoid paying TCS up to Rs 7 lacs per credit card/ debit card in their possession. At the same time lower middle-class customers, housewives, and senior citizens who avail foreign exchange by paying from their account will be subject to a 20 per cent TCS. This will prove extremely detrimental to these customers, who may have no requirement to file taxes and this will significantly compromise the business viability of licensed Money changers in India. The industry expects the Ministry/Government to provide further clarification that the exemption of TCS up to Rs 7 lacs per annum also applies to cash forex purchases, wire transfers, and prepaid forex cards.
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