The Indian government has addressed the concerns surrounding the 20% Tax Collected at Source (TCS) on overseas credit card spending. In a recent announcement, it stated that individuals will not be subject to tax on international spending of up to ₹7 lakh per financial year using their debit or credit cards.
The Ministry clarified that to eliminate any ambiguity in the procedure, payments made by individuals with their international debit or credit cards within the ₹7 lakh threshold will be excluded from the Liberalised Remittance Scheme (LRS) limits, ensuring they are not liable for TCS.
However, it is important to note that any foreign payments exceeding ₹7 lakh per year through international debit or credit cards will be subject to a 20% TCS levy starting from July 1, 2023.
Currently, medical treatment and education expenses incurred abroad up to ₹7 lakh annually are exempt from TCS. Any expenses exceeding this amount are subject to a 5% TCS levy.
For individuals who have availed education loans, the TCS rate stands at 0.5%.
The government has emphasized that the existing beneficial TCS treatment for education and health payments will continue as before.
The increase in TCS for foreign remittances under the LRS from 5% to 20% (except for education and medical purposes) was announced in the Budget 2023. This new rule will come into effect on July 1, 2023.
Recently, the government brought overseas credit card spending under the purview of the Liberalised Remittance Scheme. This meant that from July 1, any expenses made using credit cards overseas would attract a 20% tax. Debit card spending was already covered under the LRS.
However, the introduction of TCS on international transactions received criticism. Ashneer Grover, the founder of BharatPe, expressed his view on Twitter, highlighting that there is a 20% TCS on foreign travel and credit card spending, but no TCS on political donations, which are eligible for income tax rebates.
These recent developments aim to clarify the TCS regulations for international debit and credit card usage. Individuals can now enjoy tax exemption on overseas spending up to ₹7 lakh per financial year, while any transactions beyond this limit will be subject to the 20% TCS levy. It is advisable to stay informed and compliant with the updated guidelines to avoid any unnecessary complications.