'And we want INR to replace USD': 20% TCS on foreign spending via credit cards sparks outrage on Twitter

20% TCS on credit card forex payments: The Reserve Bank of India (RBI) has extended the coverage of its liberalised remittance scheme (LRS) and has included international credit card spending in foreign currency under this. Spending on international credit cards will attract a higher rate of Tax Collected at Source (TCS) at 20 per cent effective July 1, 2023. This announcement raised heckles among Twitter users who went as far as calling the move "tax terrorism".

On Tuesday, the Finance Ministry notified the amended rules under the Foreign Exchange Management Act (FEMA), which said that credit card spending outside India will be the LRS.  The notification said that rule 7 of the FEMA (Current Account Transactions) Rules, 2000 has been omitted, which brings the usage of international credit cards towards meeting expenses on a visit outside India under LRS.

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The new rule will enable the higher levy of TCS, as announced in the Budget for 2022-23, from July 1.

Till July 1, a TCS of 5 per cent will be levied on such transactions, except medical and education-linked sectors. After July 1, however, all such transactions will be charged at 20 per cent.

The decision to impose 20 per cent TCS on international credit card spending has caught the attention of Twitterati and was the top trending topic on the social media platform on Thursday.  

 “20% TCS on credit card use outside India. The biggest risk to India story is Finance think tank. Keep changing taxes and increase burden on the same 4-5 cr people who pay tax -through STT, capital gain, dividend, TCS, angel tax, fringe benefit tax etc. Speed breaker mindset- instead of catching d erring people , make everyone suffer,” said Gurmeet Chadha, CIO & Managing Partner, Complete Circle Wealth.

Ajay Rotti, Founder and CEO, Tax Compaas said: “Dear @nsitharaman- TCS on international use of credit cards is not something you should go ahead with. It impacts a lot of business travelers who spend on behalf of the company. It serves no purpose with TCS on the employees name and it can't be on company name!”

TCS, as proposed, is not a good idea from the perspective of ease of business, he stated, adding that 20 per cent TCS is “too high”, he added.

Many users highlighted how the 20 per cent TCS on credit card usage in foreign countries will hamper "ease of doing business".

“So 20% TCS on foreign spending through credit cards and we want the ‘₹’ to replace the ‘$’- Kya baat hai,” said Basant Maheshwari, Investor and Portfolio Management Services, Smallcase.

Commenting on the update, Deepak Shenoy, Founder-CEO of investment research and wealth management startup Capitalmind, said: "This is big. Removing rule 7 changes the game. Every international credit card transaction, from today, made by an individual => will be under LRS limits. Means 5 per cent TCS till July 1. And 20 per cent tax collected at source after that."

 

Many users also criticised the government and named the 20% TCS on credit card usage in foreign countries as a way of burdening the common people. Some even termed the move as tax terrorism. 

Some users even shared funny memes criticising the additional TCS the travellers will have to pay on booking overseas travel packages.

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

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