NEW DELHI: Amid the ongoing uncertainty on the issue of imposed Tax Collected at Source (TCS) on the usage of international debit or credit cards during foreign travel, Rajya Sabha member Priyanka Chaturvedi wrote a letter to the Union Finance Minister Nirmala Sitharaman to consider scrapping or minimising such taxes as well as bringing some clarity on the exemption limits that were announced.
She also requested the Finance Minister to lay down procedures about how would banks track the transactions at the Point of Sale.
“While the introduction of the Liberalised Remittance Scheme (IRS) has been well intended, it is my opinion that extending the regulations to credit card along with existing debit card payments may prove to be counter-productive from a policy perspective,” Chaturvedi wrote in the letter to Sitharaman.
“In order to strike a balance and protect the interests of genuine individuals who may sporadically engage in overseas travel or conduct genuine transactions using international credit cards, policy alternatives such as a nominal Tax collected at source (TCS) rate may be considered or removal of TCS for such cases. This may also help in tackling the issue of delay in refund and encourage higher compliance.”
The Ministry of Finance on Friday said it decided that any payments by an individual using their international debit or credit cards upto Rs seven lakh per financial year will be excluded from the RBI’s Liberalised Remittance Scheme (LRS) limits and hence, will not attract any Tax Collected at Source (TCS).
The clarification comes after some concerns were raised about the applicability of Tax Collection at Source (TCS) to small transactions under the Liberalized Remittance Scheme (LRS) effective July 1, 2023.
Earlier on Thursday, Tax Collected at Source (TCS) for spending through international credit cards under RBI’s Liberalised Remittance Scheme on overseas tour packages and any other remittance (such as for bonds, shares, and real estate gifts) was exempted within the annual limits of $250,000. TCS for these cases, when it crosses $250,000 per fiscal, will be now at 20 per cent from July 1, against the earlier 5 per cent.
The Finance Ministry said the changes were necessitated as some instances have come to notice where the LRS payments were “disproportionately high” when compared to the disclosed incomes.
The new rules under LRS doesn’t change anything except bringing parity between the usage of debit and credit cards abroad.
The differential treatment between debit cards and credit cards is sought to be removed through the changes, according to the government.
Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to $2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.
The scheme was introduced on February 4, 2004, with a limit of $25,000. The LRS limit has been revised in stages consistent with prevailing macro and micro economic conditions. There are no restrictions on the frequency of remittances under LRS. (ANI)