The government's higher tax charge on international payments will not affect corporate credit cards.
According to a clarification provided by the Finance Ministry on Thursday, employees of companies going on business trips and using corporate cards will not be subject to the higher tax charges.
"When an employee is being deputed by an entity for any of the above, and the expenses are borne by the latter, such expenses shall be treated as residual current account transactions outside LRS and may be permitted by the AD without any limit, subject to verifying the bona fide of the transaction," the ministry said in its clarification.
In a gazette notification this week, the government said that it was including international credit card spends in the liberalised remittance scheme. Under the scheme, an Indian resident is allowed to spend upto $250,000 each year in foreign remittances without seeking the Reserve Bank of India's approval.
Transactions under the LRS attract tax collected at source, which can be claimed back at the end of the financial year. Currently the TCS on these transactions is set at 5%, which will be hiked to 20% on July 1.
Apart from exemptions on corporate cards, the government has also mandated a lower tax collected at source for transactions relating to education and health.
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