- Date : 19/05/2023
- Read: 3 mins
Liberalised Remittance Scheme (LRS) will now cover international credit card usage in foreign exchange.
- The Finance Ministry has announced a new rule whereby the LRS will cover international credit card usage.
- Previously, international credit cards were not under LRS's ambit.
- Bank transfers and Forex cards were included under LRS previously.
The Finance Ministry has announced that international credit card usage will now be covered under the Liberalised Remittance Scheme under the FEMA (Foreign Exchange Management Act). The LRS included bank transfers and debit cards but not international credit cards earlier. Vinit Khandare, the Founder and CEO of MyFUndBazaar, quickly commented that the move would lead to a higher levy of TCS.
Also Read: TCS on Foreign Remittance 2022
Can You Claim a 20% TCS Return?
The CEO and Founder of Clear, Archit Gupta, believes that the TCS on international credit card usage will result in higher card bills. It will block money for many months before one can file a return and claim refund. Another factor will be that banks will now have to set up compliance processes and many other things as their burden increases. Many Indians travel internationally and use their international credit cards for expenses. Taxpayers might require Form 26AS to track their TCS entries.
Rule 7 of Foreign Exchange Management Rules, 2000, Omitted
The Finance Ministry has omitted Rule 7 after consulting with the RBI. The new notification means that no prior approval from the RBI is required to spend overseas through credit cards. Spenders will initially be charged 5% TCS until July 1, gradually increasing to 20% post-July 1. The education and medical sectors have not been included in this. In a nutshell, all international credit card transactions will now be within the LRS limits. You must now list foreign costs separately in your credit card statements according to the category.
Residents of India will be allowed to remit to the tune of $250,000 yearly without RBI approval. The seller will collect TCS during the sale. The latest Union Budget saw the TCS increase from 5% to 20% on funds and overseas tour packages under the LRS. The travel agents or banks will now collect TCS. The move will lead to more transparency and make it easier to track international transactions. TCS to the tune of 5% will be levied upon exceeding Rs. 7 lakhs for education and medical treatment. Other expenses such as travel, foreign tours, and real estate will attract a 20% TCS. If you avail of an overseas education loan, a 0.5% TCS will be levied over the Rs. 7 lakhs.