The amendment to the Foreign Exchange Management (Current Account Transactions) Rules, 2000, will be effective retrospectively from May 16
The finance ministry on Friday amended the foreign exchange management rules to exclude international credit card spends from the purview of liberalised remittance scheme (LRS).
Read More: HDFC Chairman Deepak Parekh Formally Announces Retirement; Read Full Letter To Shareholders
The amendment to the Foreign Exchange Management (Current Account Transactions) Rules, 2000, will be effective retrospectively from May 16, the ministry said in a notification.
“The use of International Credit Card for making payment by a person towards meeting expenses while such person is on a visit outside India” will not be covered under LRS, the notification said while inserting Rule 7 in the FEM (CAT) Rules.
Read More: Tomato At Rs120 Per KG, Cabbage At Rs 50: Vegetable Prices Skyrocket Across Cities In India
The amendment reverses the notification brought by the ministry on May 16 which omitted Rule 7 from FEM (CAT) Rules, thereby effectively including forex spend through international credit cards under the LRS.
Under the RBI’s liberalised remittance scheme, a resident can remit money abroad up to a maximum of USD 2.50 lakh per annum. Any remittance beyond this would require approval from the RBI.
Also, remittances under LRS are subject to tax collection at source (TCS). Bringing international credit card spends within the LRS would have increased the compliance burden for banks.
Read More: SBI CFO Charanjit Surinder Singh Attra Resigns; New Directors Appointed to Central Board
Following the May 16 change in FEM (CAT) Rules, concerns were raised by general public over its impact.
In a statement on June 28, the ministry had said that “to give adequate time to banks and card networks to put in place requisite IT-based solutions, the government has decided to postpone the implementation of its May 16, 2023, notification”.
Transactions through international credit cards while “being overseas would not be counted as LRS and hence, would not be subject to TCS”, the ministry had said.
