Spending through international credit cards will now be covered under the LRS; however, there is an exemption limit of Rs 7 lakh a year
The government last week amended the foreign exchange management rules to apply 20% TCS on foreign remittances through the RBI’s liberalised remittance scheme (LRS). Spending through international credit cards will now be covered under the LRS. However, there is an exemption limit. Here’s about the RBI LRS and 20 per cent TCS on spending abroad.
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Under the liberalised remittance scheme, all resident individuals (including minors) are allowed to freely remit up to $2,50,000 in a financial year (April-March) for any permissible current or capital account transaction or a combination of both.
Earlier, the usage of international credit cards (ICCs) for making payments for fulfilling expenses during travel outside India was not included in the LRS limit.
According to the notification, the finance ministry, in consultation with the RBI, has omitted Rule 7 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, thus effectively including forex spending through international credit cards under the LRS.
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The Union Budget 2023-24 hiked TCS rates to 20 per cent, from 5 per cent currently, on overseas tour packages and funds remitted under LRS (other than for education and medical purposes). The new tax rates will come into effect from July 1, 2023.
The finance ministry later clarified that any payments by an individual using international debit or credit cards up to Rs 7 lakh per financial year excluded from LRS limits and will not attract any TCS.
TCS Will Not Be Deducted
Will NOT apply on the payments for purchase of foreign goods/services from India such as newspapers or online streaming services
Will NOT apply on Company/Business trips (IT sector employees unaffected)
Will Not apply on the payments for ‘Education’ & ‘Medical purposes’
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Applicability
Will basically APPLY to the Rich for Buying Property, Shares & Foreign Travel
Primary Impact only on investment in assets such as real estate, bonds, stocks outside India by HNI and tour travel packages or gifts to non-residents. does not effect any changes in the use of international credit cards by residents while in India
Does not affect any changes in the use of international credit cards by residents while in India. Overseas tour package booked in Indian credit card (rupees) is NOT affected. (Eg: Booked from MakeMyTrip).
