The Indian finance ministry has
extended the implementation date for increased Tax Collection at Source (TCS)
rates and the inclusion of credit card payments in the Liberalised Remittance
Scheme (LRS). The new TCS rates, which were supposed to be effective from July
1, 2023, will now come into effect from October 1, 2023. This decision provides
more time for the implementation of the revised TCS rates and the inclusion of
credit card payments in the LRS.
As a result of this extension, transactions made
through international credit cards while abroad will not be considered LRS
transactions and will not be subject to TCS, contrary to the earlier
announcement. The revised TCS rates for LRS and overseas tour packages remain
unchanged for amounts up to Rs. 7 lakh per individual per year, regardless of
the payment mode. However, for overseas expenses on credit cards exceeding Rs.
7 lakh, a TCS rate of 20% will apply. Medical or educational expenses incurred
through credit cards will be subject to a lower TCS rate of 5%. Individuals
availing loans for overseas education will face a TCS rate of 0.5% above the
Rs. 7 lakh threshold.
The Union Budget 2023-24 initially announced the
increase in TCS rates to 20% for overseas tour packages and funds remitted
under LRS, with the effective date set as July 1, 2023. However, the
implementation of these rates has been delayed by three months to October 1,
2023.
It is important to note that in May, changes were
made to the FEMA Current Account Transaction Rules, bringing overseas credit
card expenses under the purview of the Liberalised Remittance Scheme. This
scheme allows residents to remit up to USD 2.50 lakh per year abroad, with RBI
approval required for transactions exceeding this limit.
