New Delhi, May 19, 2023: The Indian government has addressed concerns regarding the applicability of Tax Collection at Source (TCS) to small transactions under the Liberalized Remittance Scheme (LRS) starting from July 1, 2023. To eliminate any procedural ambiguity, it has been decided that payments made by individuals using their international debit or credit cards, up to Rs 7 lakh per financial year, will be exempted from the LRS limits and will not attract any TCS.
The finance ministry clarified, “Concerns have been raised about the applicability of Tax Collection at Source (TCS) to small transactions under the Liberalised Remittance Scheme (LRS) from July 1, 2023. To avoid any procedural ambiguity, it has been decided that any payments by an individual using their international debit or credit cards up to Rs 7 lakh per financial year will be excluded from the LRS limits and hence, will not attract any TCS.” The ministry also confirmed that the existing beneficial TCS treatment for education and health payments will continue. Changes to the Rules (Foreign Exchange Management (Current Account Transactions Rules), 2000) will be issued separately to reflect this decision.
In a move aimed at addressing concerns raised by experts and stakeholders, the government announced that no TCS will be levied on international spending of up to Rs 7 lakh per year using debit or credit cards. The decision to bring international credit card spending under the RBI’s LRS and the subsequent imposition of a 20% TCS had generated significant backlash earlier this week.
The clarification from the finance ministry brings relief to individuals who frequently use their debit or credit cards for overseas transactions within the specified limit. By excluding these transactions from the LRS limits, the government aims to provide clarity and alleviate any ambiguity surrounding the applicability of TCS.
The decision is expected to have a positive impact on individuals’ international spending habits and alleviate concerns about potential financial burdens resulting from the imposition of TCS. The government’s continued focus on promoting ease of transactions and providing relief for education and health-related payments further reinforces its commitment to supporting individuals’ financial well-being.