1122329 SIP myths you must know!
The Finance Ministry has also deferred to October 1, the implementation of a higher TCS of 20 per cent on expenditures made under LRS and overseas tour packages
The plan for tax collection at source on overseas payments through international credit cards has been dropped. The government late on Wednesday evening said such expenses will be included in the Liberalised Remittance Scheme of the RBI.
The Finance Ministry has also deferred to October 1, the implementation of a higher TCS of 20 per cent on expenditures made under LRS and overseas tour packages. The finance ministry in a statement said the move will give adequate time to banks and card networks to put in place IT-based solutions to implement the scheme. These payments were brought under LRS through a notification on May 16. It also clarified that “transactions through international credit cards while being overseas would not be counted as LRS and hence would not be subject to TCS”.
This effectively means that the plans to levy TCS on international credit card spending have been dropped.
The Budget 2023-24 had raised TCS rates on LRS and foreign tour packages from 5 per cent to 20 per cent, effective July 1. With the new announcement, LRS spending above Rs 7 lakh would attract 20 per cent TCS from October 1.
On the purchase of overseas tour packages, a TCS of 5 per cent will be applicable on payments up to Rs 7 lakh. Above the threshold, 20 per cent would be levied from October 1. Currently, overseas tour packages and LRS spending above Rs 7 lakh attract 5 per cent TCS.
A TCS of 5 per cent is levied on expenses exceeding Rs 7 lakh towards medical treatment and education. For those availing loans for overseas education, a lower TCS rate of 0.5 per cent would be levied above the Rs 7 lakh threshold.
“The increase in TCS rates; which were to come into effect from 1st July, 2023 shall now come into effect from 1st October, 2023,” the ministry said.
The necessary changes to the Rules (Foreign Exchange Management (Current Account Transactions Rules), 2000) will be issued separately. Also, Frequently Asked Questions (FAQs) shall be issued to clarify various practical issues, the ministry added.