Finance Minister clarification: Good news! No 20% tax on foreign spending via cards for payments up to Rs 7 lakh, know details

TCS Update: While notifying the Foreign Exchange Management Amendment Rules 2023, the Finance Ministry on Tuesday announced the inclusion of expenses incurred abroad through international credit cards in the Liberalized Remittance Scheme (LRS).

New Delhi. In view of the opposition to the decision to impose 20 percent tax collection at source (TCS) on credit or debit card payments abroad, the Finance Ministry issued a clarification today. The ministry said that if a person spends up to Rs 7 lakh abroad with an international credit or debit card, he will not have to pay TCS. Meaning that the expenditure up to 7 lakhs has been excluded from the purview of the Liberalized Remittance Scheme (LRS) of the Reserve Bank of India (RBI).

Moneycontrol According to a report, the Finance Ministry clarified, “Concerns have been raised regarding the applicability of Tax Collection at Source (TCS) for small transactions under the Liberalized Remittance Scheme (LRS) from July 1, 2023. In order to avoid any procedural ambiguity, it has now been prescribed that the amount spent by an individual using his international debit or credit card in a financial year up to Rs.7 lakh has been excluded from the LRS limit, And hence TCS will not have to be paid on it.

Notifying the Foreign Exchange Management Amendment Rules 2023, the Finance Ministry on Tuesday announced the inclusion of expenses incurred abroad through international credit cards in the Liberalized Remittance Scheme (LRS). Its purpose was to ensure that such expenses come under the ambit of Tax Collection at Source (TCS).

Earlier card payments were not under the purview of LRS

Till before this notification, international credit card payments for expenses incurred during foreign travel were not covered under the purview of LRS. The Finance Ministry, in consultation with the RBI, issued a notification and removed section 7 of the Foreign Exchange Management Rules, 2000. Due to this, payments made abroad through international credit cards also came under the ambit of LRS.

The new tax rate will be applicable from July 1.

Earlier this year, in the budget presented for 2023-24, the TCS rate was increased from 5 percent to 20 percent. The new tax rate is going to be implemented from July 1, 2023. Under this, except for education and medical expenses, it has been said that these rules will be applicable on foreign tour packages or other expenses under LRS.

The post Finance Minister clarification: Good news! No 20% tax on foreign spending via cards for payments up to Rs 7 lakh, know details first appeared on informalnewz.