Credit card spends done overseas will not attract tax collected at source as these transactions have been kept outside the liberalised remittance scheme.
"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 16th May 2023 e-gazette notification," the government said in a statement on Wednesday. "This would mean that transactions through international credit cards while being overseas would not be counted as LRS and hence would not be subject to TCS. The press release dated 19th May 2023 stands superseded."
This is a reversal from the government's previous stance where it sought to bring all international credit card transactions under the ambit of the liberalised remittance scheme.
The Ministry of Finance also clarified the matter through a series of tweets.
👉 Important changes w.r.t. Liberalised Remittance Scheme #LRS and Tax Collected at Source #TCS
👉 No change in rate of #TCS for all purposes under #LRS and for overseas travel tour packages, regardless of mode of payment, for amounts up to ₹7 lakh per individual per annum
👉… pic.twitter.com/PCQlwavHZTWhile credit card transactions conducted overseas are outside the ambit of the liberalised remittance scheme, any international transaction conducted from India will attract TCS. So users purchasing foreign goods and services through an international merchant will need to pay 5% upfront.
From Oct. 1, the tax collected at source will be raised to 20% for spends above Rs 7 lakh per person, the statement on Wednesday said. The higher tax rate will be applicable on international tour packages and spends through transaction modes other than credit cards.
The original implementation date was July 1.
The government's move to bring international credit card spends within the ambit of liberalised remittance scheme had seen severe opposition from the public.
Banks, which were supposed to be the agents to implement the 20% tax collection norm, had also approached the Finance Ministry seeking more time as they were not technologically prepared to do so.
Essential Business Intelligence, Continuous LIVE TV, Sharp Market Insights, Practical Personal Finance Advice and Latest Stories — On NDTV Profit.
