The central government recently provided information about new rules related to tax collection on foreign payments made through plastic cards.
As per the updated regulations announced on Friday, if you spend up to Rs 7 lakh abroad using a debit or credit card in a financial year, you will be exempt from Tax Collected at Source (TCS).
The Finance Ministry stated that this provision aims to eliminate ambiguity surrounding the Liberalized Remittance Scheme (LRS) and the application of TCS.
LRS Provision for Credit Card Payments
In March, the Finance Bill 2023, presented by Union Finance Minister Nirmala Sitharaman, included a provision to bring credit card payments for foreign visits under the LRS.
Sitharaman emphasized that if credit card payments for overseas trips are made under the LRS, TCS will not be applicable.
However, the proposal to impose a 20% TCS under the LRS from July 1, 2023, except for education and medical purposes, faced strong opposition.
Updated Decision on TCS Exemption
To address any procedural uncertainties, the Finance Ministry has now excluded credit card payments abroad up to Rs 7 lakh from the LRS limits.
As a result, TCS will no longer be applicable for these transactions.
Previously, TCS relief was only granted for payments up to Rs 7 lakh related to medical treatment and education abroad, while a 5% TCS was imposed on other expenses.
Our Thought:
The newer limit of 7 lakhs is good but it could have been better with 10lakhs. With increased earnings, and easy reach to global markets, the Indian consumer not only heading to foreign countries but also shopping globally from their home.
And purchasing in foreign currency is costlier. 7 lakhs in USD is like $9000. if you buy 3 laptops in 1 year you have crossed that limit. I know that is not the case of an average buyer but that surely is a case.
This move from government is appreciated but we also demand further increase. Are you satisfied with this new limit? Let is know in comments below.
