In a recent development, the Ministry of Finance has made significant announcements regarding the Tax Collection at Source (TCS) rates for foreign remittances and credit card payments. The changes aim to streamline tax policies and provide clarity on transactions made under the Liberalised Remittance Scheme (LRS) and overseas tour program packages.
Originally set to take effect from July 1, 2023, the increased TCS rates will now be implemented from October 1, 2023. This decision comes after careful consideration of numerous comments and suggestions received by the ministry regarding the changes in TCS and LRS. The official communication highlighted the need for additional time to allow banks and card networks to implement the necessary IT-based solutions.
One of the significant updates pertains to transactions made through international credit cards while overseas. The Ministry clarified that these transactions will not be considered as LRS and, therefore, will not be subject to TCS. This exemption provides relief to individuals using credit cards for international expenses.
Furthermore, the threshold for TCS on all categories of LRS payments, regardless of the mode of payment, will be restored to Rs 7 lakh per financial year per individual. This means that for the first Rs 7 lakh remittance under LRS, no TCS will be levied. However, beyond this threshold, different rates of TCS will apply depending on the purpose of remittance.
For remittances related to education financed by an education loan, the TCS rate will be 0.5%. Remittances for education or medical treatment will attract a 5% TCS rate, while other purposes of remittance will be subject to a 20% TCS rate.
The announcement also clarified that the TCS rate of 5% will continue to apply for the first Rs 7 lakhs per individual per annum for the purchase of overseas tour program packages. The 20% TCS rate will only be applicable for expenditure exceeding this limit.
The revised TCS rates, originally scheduled for July 1, 2023, will now be implemented from October 1, 2023. However, the existing rates (prior to the amendment by the Finance Act 2023) will continue to apply until September 30, 2023.
These updates aim to provide more clarity and stability for individuals making foreign remittances and credit card payments, ensuring a smoother and more transparent tax process. The Ministry’s decision to consider public feedback demonstrates its commitment to incorporating constructive suggestions while formulating tax policies.
As the implementation date approaches, individuals and financial institutions are encouraged to stay informed about the revised TCS rates and the specific guidelines regarding credit card transactions and foreign remittances. These updates will play a crucial role in facilitating international transactions and promoting ease of doing business in India.
Comparison of new TCS rates with old TCS rates:
