Wednesday, June 28, 2023

Finance Ministry Extends Deadline for TCS Rates and Credit Card Inclusion in LRS


The Indian finance ministry has extended the implementation date for increased Tax Collection at Source (TCS) rates and the inclusion of credit card payments in the Liberalised Remittance Scheme (LRS). The new TCS rates, which were supposed to be effective from July 1, 2023, will now come into effect from October 1, 2023. This decision provides more time for the implementation of the revised TCS rates and the inclusion of credit card payments in the LRS.

As a result of this extension, transactions made through international credit cards while abroad will not be considered LRS transactions and will not be subject to TCS, contrary to the earlier announcement. The revised TCS rates for LRS and overseas tour packages remain unchanged for amounts up to Rs. 7 lakh per individual per year, regardless of the payment mode. However, for overseas expenses on credit cards exceeding Rs. 7 lakh, a TCS rate of 20% will apply. Medical or educational expenses incurred through credit cards will be subject to a lower TCS rate of 5%. Individuals availing loans for overseas education will face a TCS rate of 0.5% above the Rs. 7 lakh threshold.

The Union Budget 2023-24 initially announced the increase in TCS rates to 20% for overseas tour packages and funds remitted under LRS, with the effective date set as July 1, 2023. However, the implementation of these rates has been delayed by three months to October 1, 2023.

It is important to note that in May, changes were made to the FEMA Current Account Transaction Rules, bringing overseas credit card expenses under the purview of the Liberalised Remittance Scheme. This scheme allows residents to remit up to USD 2.50 lakh per year abroad, with RBI approval required for transactions exceeding this limit.