Overseas spending using credit card won't attract TCS: FinMin

The Centre has decided to exempt overseas credit card spending from tax collected at source (TCS) by excluding such spending from the Liberalised Remittance Scheme (LRS), as per a late Wednesday Finance Ministry release.

In March this year, it was announced that credit card payments would be brought under the LRS. In the latest Union Budget, certain changes were announced to the system of TCS on payments under the Liberalised Remittance Scheme (LRS) and on overseas tour programme packages. These were to take effect on July 1, 2023. As per the latest announcements, these changes will now be considered from October 1, 2023. 

As per the Centre, numerous comments and suggestions were received, which have been considered by the Ministry of Finance, on the basis of which it has been decided to give banks and card networks adequate time to put in place the requisite IT-based solutions. This also means that transactions through International credit cards while overseas would not be counted as LRS and hence would not be subject to TCS.

"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. 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 The Press Release dated 19th May 2023 stands superseded." the ministry clarified

In terms of TCS rates, there will be no changes in the rate of TCS for all purposes under LRS, regardless of the mode of payment, for amounts up to Rs. 7 lakh per individual per annum until September 30. The TCS on overseas tour packages for Individuals under September 30 will continue to be at 5 per cent for transactions until Rs 7 Lakh per annum, while the LRS on expenditure financed by the loan will be taxed at 0.5 per cent above Rs 7 lakh per annum and medical treatment at 5 per cent above Rs 7 lakh per annum.

 As per the new rates, TCS on overseas tour packages for individuals spending above Rs 7 lakh will be taxed at 20 per cent from October 1, 2023.