Finance Ministry Excludes Overseas Spending on International Credit Cards from TCS
– The finance ministry announced that overseas spending using international credit cards will not be subject to Tax Collection at Source (TCS) and will not be included under the Liberalised Remittance Scheme (LRS).
– The implementation of a higher TCS rate of 20% on overseas remittances under LRS, such as tour expenses, has been deferred by three months.
– The revised TCS rate will now come into effect from October 1, 2023.
– Credit card spending overseas will not attract TCS from October 1.
– The higher TCS rate of 20% will only be applicable when the LRS payments exceed the threshold of Rs 7 lakh.
– The rate of TCS for all purposes under LRS and for overseas travel tour packages will remain unchanged, regardless of the mode of payment, for amounts up to Rs 7 lakh per individual per annum.
– The finance ministry has given more time for the implementation of the revised TCS rates and for the inclusion of credit card payments in LRS.
– For the purchase of an overseas tour programme package, the TCS rate will continue to apply at 5% for the first Rs 7 lakhs per individual per annum, while the 20% rate will only apply for expenditure above this limit.
**Analysis**
– The finance ministry’s decision to exclude overseas spending on international credit cards from TCS will provide relief to individuals who frequently travel abroad and use credit cards for their expenses.
– The deferment of the higher TCS rate on overseas remittances under LRS will give individuals more time to adjust to the new regulations and make necessary arrangements for their finances.
– The revised TCS rates and inclusion of credit card payments in LRS will now be implemented from October 1, 2023, allowing individuals and businesses to prepare accordingly.
– The threshold of Rs 7 lakh for triggering TCS on LRS will remain in place, providing clarity on the applicability of TCS for different payment amounts.
– The finance ministry’s decision to maintain the existing TCS rate for all purposes under LRS and for overseas travel tour packages will ensure consistency and avoid confusion among taxpayers.
– The amendments introduced in Union Budget 2023 regarding TCS on LRS payments and purchase of overseas tour programme packages will now be effective from October 1, 2023.
– The exemption of TCS for credit card spending overseas will encourage individuals to use credit cards for their international expenses and promote digital transactions.
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