Credit Card Usage Abroad Won't Attract Tax Collected At Source, Increased TCS Rates To Apply From 1 October: Govt

The Union Finance Ministry on Wednesday (28 June) said that credit card usage outside India will not be included under the Liberalised Remittance Scheme (LRS) and hence, would not attract TCS.

Further, the implementation of a higher rate of TCS of 20 per cent on overseas remittances under LRS, like tour expenses, has been deferred by three months and will come into effect from 1 October instead of 1 July.

In the Finance Bill 2023, the government had increased the rate of TCS from 5 per cent to 20 per cent for remittance under LRS as well as for the purchase of overseas tour programme packages and removed the threshold of Rs 7 lakh for triggering TCS on LRS.

These two changes were not applicable when the remittance is for education or medical purpose. These amendments were to take effect from 1 July 2023.

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 added.

The Government had notified Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 to remove the differential treatment for credit cards vis à vis other modes of withdrawal of foreign exchange under LRS.

For the purchase of an overseas tour programme package, the TCS shall continue to apply at the rate of 5 per cent for the first Rs 7 lakhs per individual per annum; the 20 per cent rate will only apply for expenditure above this limit, the ministry added.