The Ministry of Finance has announced that the implementation of the increased Tax Collection at Source (TCS) rates, initially scheduled for July 01, 2023, has been postponed to October 01, 2023. In addition, the Ministry clarified that transactions made with international credit cards while abroad would not be considered under the Liberalized Remittance Scheme (LRS) and would therefore be exempt from TCS. Previously, it had been decided that a 20% TCS would be imposed on all credit card expenditures made overseas.
In response to feedback from various stakeholders, certain changes have been made. Firstly, it has been decided that the TCS rate will remain unchanged for all purposes under LRS and for overseas travel tour packages, regardless of the payment method, for amounts up to Rs. 7 lahks per individual per annum. Furthermore, more time will be given to implementing the revised TCS rates and to including credit card payments in the LRS.
After extensive discussions with stakeholders and considering their comments and suggestions, the following decisions have been made:
Postponement of Implementation: In order to allow banks and card networks sufficient time to establish the required IT-based solutions, the government has decided to postpone the implementation of the e-gazette notification issued on May 16, 2023. As a result, transactions made with international credit cards abroad will not be considered under the LRS and will be exempt from TCS.
Threshold of Rs. 7 Lakh: The threshold of Rs. 7 lakhs per financial year per individual in clause (i) of sub-section (1G) of section 206C will be reinstated for TCS on all categories of LRS payments, regardless of the purpose and mode of payment. This means that no TCS will be applicable for the first Rs. 7 lakh remittance under LRS. Beyond this threshold, the TCS rates will be as follows:
a) 0.5% for remittances related to education financed by an education loan.
b) 5% for remittances related to education/medical treatment.
c) 20% for all other purposes.
Revised TCS Rates Effective from October 01, 2023: The increased TCS rates, originally scheduled to take effect from July 01, 2023, will now be implemented from October 01, 2023, with the modifications mentioned in point 2 above. Until September 30, 2023, the previous rates (prior to the amendment by the Finance Act 2023) will continue to apply.
By making these adjustments, the government aims to provide ample time for banks and card networks to adapt to the new regulations and ensure a smooth transition for individuals making international credit card transactions. The restoration of the Rs. 7 lakh threshold for TCS on LRS payments will also alleviate the burden on individuals within that limit. These changes aim to strike a balance between revenue generation and facilitating ease of transactions for individuals.
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