According to the Ministry of Finance, overseas purchases made with international credit cards will not be included in the Liberalised Remittance Scheme (LRS), and thus will not be subject to TCS.
In addition, the implementation of a higher rate of tax collected at source (TCS) of 20% on overseas remittances under LRS, such as tour expenses, has been postponed by three months and will now take effect on October 1, 2023, rather than July 1, 2023.
However, international credit card purchases will not be subject to TCS beginning October 1.
The higher TCS rate will only be applicable if LRS payments exceed the 7 lakh INR threshold.
In Finance Bill 2023, the government increased the TCS rate from 5% to 20% for remittances under LRS as well as for the procurement of overseas tour packages and removed the INR 7 lakh threshold for triggering TCS on LRS.
These two modifications did not apply to remittances for educational or medical purposes. These amendments were scheduled to go into effect on July 1, 2023.
In response to the feedback and suggestions, it has been decided to make the necessary modifications. First, it has been decided that the TCS rate will remain unchanged for all purposes under LRS and for overseas travel tour packages, irrespective of the mode of payment, for quantities up to INR 7 lakh per individual per year.
“It was also decided to extend the implementation of the revised TCS rates and the inclusion of credit card payments in the LRS,” the finance ministry said. The TCS will continue to apply at the rate of 5% for the first INR 7 lakhs per individual per year for the purchase of an overseas tour package; the 20% rate will only apply for expenditures exceeding this threshold, according to the ministry.
“For purchase of overseas tour programme package under Clause (ii) of Sub-Section (1G), the TCS shall continue to apply at the rate of 5% for the first INR 7 lakh per individual per year, and the 20% rate shall apply only for expenditures exceeding this limit,” the ministry said.
Source- travel biz