3 min readNew DelhiJun 29, 2023 01:10 PM IST
First published on: Jun 29, 2023 at 01:10 PM IST
Days before the new rule was set to kick in, the Union government on Wednesday deferred its decision to include international credit card spends outside India under the Liberalised Remittance Scheme (LRS).
The big point: International credit card spends outside India will not fall under the ambit of the LRS for now, the Finance Ministry said on Wednesday. Further, the proposed increase in TCS rates, which was previously supposed to be implemented from July 1, has now been pushed to October 1.
Simply put: What this simply means is that for now, transactions made through international credit cards while travelling/living overseas would not be counted as part of LRS and hence would not be subject to TCS. The government has not yet given a date for when credit card spends will be brought under the LRS, but has said that the new TCS rates under LRS will be effective from October 1.
To understand what LRS and TCS are, refer to the cheatsheet below.
The official statement: “Firstly, it has been decided that there will be no change in the rate of TCS for all purposes under LRS and for overseas travel tour packages, regardless of mode of payment, for amounts up to Rs. 7 lakh per individual per annum. It has also been decided to give more time for the implementation of the revised TCS rates and for inclusion of credit card payments in LRS,” the Ministry of Finance said in a press release.
The why: The postponement of the decision aims to give adequate time to banks and card networks to put in place the requisite IT based solutions, the government clarified.
Rewind: The Budget 2023-24 had proposed hiking the TCS rate to 20 per cent from 5 per cent above Rs 7 lakh threshold for all purposes other than education and medical treatment. Also, for overseas tour packages, the government had proposed hiking the TCS rate to 20 per cent from 5 per cent, without any threshold, with effect from July 1.
Further, on May 16, the Centre had amended rules under the Foreign Exchange Management Act (FEMA), bringing international credit card spends outside India under the LRS.
Cheatsheet:
LRS: The Liberalised Remittance Scheme (LRS) allows Indian residents to remit (transfer), up to $2,50,000 (approximately Rs 2.06 crore) outside the country without prior approval from the RBI. Travelling abroad for tourism and business, education, medical purposes and other common foreign transactions fall under the purview of the LRS.
TCS: Tax collected at source (TCS) is an extra amount – over and above the sale amount of a particular good/service – that is taken as tax by the seller from the buyer at the time of sale. The amount is deposited to the tax authorities. It is important to note that the TCS paid can be adjusted against the tax payable by an individual when the income tax return is filed.
On May 16, the Centre amended rules under the Foreign Exchange Management Act (FEMA), bringing international credit card spends outside India under the LRS. (File photo for representation) 
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