New Delhi: The Finance Ministry on Friday said it has been decided that any payment up to Rs 7 lakh per financial year by an individual using his international debit or credit card will be kept out of the ambit of the RBI’s Liberalized Remittance Scheme and hence No tax will be charged at source. (TCS).
The clarification comes after some concerns about the applicability of tax collection at source for small transactions under the liberalized remittance scheme with effect from July 1, 2023. The existing beneficial TCS treatment for education and health payments will also continue.
Earlier on Thursday, TCS for international card spends up to Rs 7 lakh on overseas tour packages and any other remittances (such as for bonds, shares and real estate gifts) were allowed under the RBI’s remittance scheme subject to an annual limit of USD 250,000. The discount was given inside. For these cases, when it crosses USD 250,000 per financial year, it will now be 20 per cent from July 1, as against 5 per cent earlier.
The finance ministry said the change was needed as there have been some cases where payments were “disproportionately” compared to disclosed income. The new rules under LRS do not change anything except bringing parity between the use of debit and credit cards abroad
Credit cards were not accounted for under the specified LRS limit, due to which some individuals exceeded the annual limit.