'Political donations pe kabhi TCS nahi lagne waala': Ashneer Grover slams 20% TCS on international credit card usage

20% TCS rule: Reacting to Centre’s newly amended rule on international credit card spending, Ashneer Grover, ex-BharatPe chief and the founder of Third Unicorn, on Thursday took to social media to criticise the newly amended tax rule on international credit card spending. 

On Tuesday, the Finance ministry in a fresh notification said that international credit card spendings outside India will now come under the Liberalised Remittance Scheme (LRS). Spending with international credit cards will also attract a higher rate of Tax Collected at Source (TCS) at 20 per cent, effective July 1, 2023. 

This is noted to be a big change for foreign travellers as the present TCS is 5 per cent. The TCS rate till June 30 is 5 per cent, and will be 20 per cent from July 1.  

The use of credit cards by Indian users on foreign visits has come under the ambit of LRS effective May 16, 2023. The LRC is overseen by RBI. 

In the Union Budget 2023, Finance Minister Nirmala Sitharaman had announced that international credit card expenses would be subject to a higher TCS rate of 20 per cent, effective from July 1. 

Taking a dig at the new rule, Grover said that TCS (Tax Collected at Source) rules will never be applicable on political donations. He added that political donations in India enjoy income tax exemptions.  

"20 per cent TCS on foreign travel, 20 per cent TCS on foreign credit card spend, and the LRS limit is an interesting rule. It is interesting to note that political donations never attract TCS of any kind. There individuals and companies get a tax rebate," Grover said on Thursday. (Foreign travel pe 20% TCS; foreign credit card spend pe 20% TCS and LRS limit me lana bahut hi interesting rule hai. Haan political donations pe kabhi TCS nahi lagne waala - yeh tay hai ! Wahaan aapko ulta income tax mein rebate milegi.") 

It is to be noted that under the Old Tax regime, any Indian company or enterprise that donates to a political party or an electoral trust registered in India can claim a deduction for the amount contributed under Section 80GGB of the Income Tax Act, 1961.  

New credit card LRS rule & TCS changes 

Under the LRS scheme, the RBI allows Indian residents to spend funds abroad up to the specified ceiling for investment and expenditure, including travel, education, medical treatment and buying securities and physical assets. 

Until now, a resident Indian’s overseas use of credit cards during foreign travel was excluded from the LRS limit. However, after the changes, $250,000 cap will be provided to remit abroad in a year. 

The Union Budget 2023-24 hiked TCS rates to 20 per cent, from 5 per cent at present, on overseas tour packages and funds remitted under LRS (other than for education and medical purposes). The new tax rates will come into effect from July 1, 2023. 

The imposition of a 20 per cent TCS will increase the immediate total expenditure incurred by individuals on their travel. 

Transactions between two bank accounts, through debit and forex cards also come under the LRS scheme. 

Taxpayers may claim the '20 per cent TCS' at the time of Income Tax Return (ITR filing) as it is a direct tax levy.  

Also read: Foreign travel to get expensive from July 1! Tax collected at source to jump from 5% to 20%

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