DelhiDesk From July 1, a 20% tax collected at source (TCS) will be levied on overseas credit card expenses of Indians, except for education or medical treatment-related visits, which will be subject to a lower rate, according to the Indian finance ministry. The credit card issuer will collect the tax when the bill is settled in rupees and can be adjusted against the cardholder’s tax liability when paying taxes. The inclusion of overseas use of credit cards within the purview of the Reserve Bank of India’s liberalized remittance scheme, which attracts TCS, is effective from May 16. The TCS rates currently range from 0.5% to 5%.
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👉 A 20% tax collected at source (TCS) will be levied on overseas credit card expenses of Indians, excluding education or medical treatment-related visits.
👉 The credit card issuer will collect the tax when the bill is settled in rupees and can be adjusted against the cardholder’s tax liability when paying taxes.
👉 The TCS requirement could lead to a cash flow issue for people traveling abroad.
👉 The inclusion of overseas use of credit cards within the purview of the Reserve Bank of India’s liberalized remittance scheme, which attracts TCS, is effective from 16 May.
👉 The set of clarifications brought out by the ministry covers a range of issues regarding the enhanced TCS rates that will come into play from July 1.
👉 Overseas remittance on the purchase of tour packages and ‘any other foreign remittances’ excluding education and health spending covered under LRS will attract 20% tax from 1 July, up from 5% now.
👉 Credit card use during foreign visits is now covered under LRS, which has an annual cap of $250,000, above which RBI permission is needed.
👉 Lower rates of TCS would apply when the foreign visit is for education or medical treatment.
👉 Expenses during overseas business visits borne by the employer will be treated outside LRS.
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