TCS on payments made with overseas cards fell by 20%
TCS on payments made with overseas cards fell by 20%
The imposition of a higher TCS of 20% on expenditures made under LRS and abroad tour packages has also been postponed until October 1 by the Finance Ministry.
It has been decided not to proceed with the plan to collect taxes at the point of origin for payments made abroad using foreign credit cards. At a late hour on Wednesday evening, the government announced that these kinds of expenditures will be included in the Liberalised Remittance Scheme of the RBI.
The application of a higher TCS of 20% on expenditures made under LRS and international tour packages has also been postponed until October 1 by the Finance Ministry. This decision was made in light of the fact that the Finance Ministry has deferred this measure. According to a statement released by the Ministry of Finance, the action will provide sufficient time for banks and card networks to put in place IT-based solutions that will allow them to execute the programme.
Through a notification that was sent out on May 16th, these payments were brought under LRS. In addition to this, it was made clear that “transactions through international credit cards while being overseas would not be counted as LRS and therefore would not be subject to TCS.”
Because of this, it may be deduced that the proposals to impose a TCS on purchases made with overseas credit cards have been abandoned.
Effective July 1, the TCS rates on LRS and overseas tour packages were increased from 5% to 20% as part of the Budget 2023-24. In light of the recent announcement, tax on total LRS expenditures in excess of Rs. 7 lakh will be levied at a rate of 20% from October 1.
A tax collection levy of five percent would be imposed on payments of up to seven million rupees made for the purchase of abroad vacation packages. If the amount was greater than the threshold, a twenty percent premium would be added beginning on October 1. At this time, 5% TCS is applied on LRS spending exceeding 7 lakh rupees, which includes spending on overseas vacation packages.
If you spend more than Rs. 7 lakh on medical treatment or education, you will be subject to a tax credit assessment of 5% of that amount. Above the threshold of Rs. 7 lakh, individuals who take out loans to finance their study abroad would be subject to a TCS rate that is 0.5 percentage points lower.
“The increase in TCS rates; which were to come into effect from the 1st of July, 2023 shall now come into effect from the 1st of October, 2023,” the government said.
Separately, the amendments to the Rules (Foreign Exchange Management (Current Account Transactions Rules), 2000) that are required will be implemented. In addition, the ministry stated that it would publish a list of Frequently Asked Questions (FAQs) in order to shed light on a variety of different practical difficulties.
In addition to the amendments, the Ministry will also publish a list of Frequently Asked Questions (FAQs). These FAQs will provide clarification on various aspects of the current account transactions, addressing common queries and concerns faced by individuals and businesses. The FAQs will serve as a guide, helping stakeholders understand the rules and procedures better.
By implementing these amendments and publishing FAQs, the Ministry aims to promote transparency, reduce ambiguity, and provide clarity on the rules governing current account transactions. This will facilitate smoother and hassle-free transactions for individuals and businesses, promoting ease of doing business and encouraging foreign exchange flows.
It is important to note that the specific details and scope of the amendments and FAQs have not been provided in the given information. However, it can be inferred that the Ministry’s intent is to create a more conducive environment for current account transactions by addressing practical difficulties and providing guidance to stakeholders.
Conclusion
Overall, these measures by the Ministry reflect a proactive approach towards improving the regulatory framework and facilitating current account transactions. By introducing amendments and publishing FAQs, the Ministry aims to enhance the ease of conducting foreign exchange transactions, promote transparency, and ensure compliance with the regulations governing current account transactions in India.
