In a recent development by the Ministry of Finance, a significant change has been made regarding Tax Collected at Source (TCS) on expenditures made abroad using credit cards.
As per the new rules, no TCS will be imposed on any credit card expenditure made overseas. However,
if individuals residing in the country make payments abroad exceeding seven lakh rupees in a financial year through an International Credit Card, a 20 percent TCS will be applicable.
The ministry issued new rules related to TCS on Wednesday, but credit cards have been exempted from the TCS regulations temporarily,
until a suitable IT network solution is established between banks and credit card companies.
However, if individuals spend more than seven lakh rupees in any financial year through non-credit card means while traveling abroad,
taxes ranging from 0.5 percent to 20 percent will be levied.
Originally scheduled to be implemented from July 1, the implementation date for the new TCS rules has been changed to October 1.
For expenditures made abroad for educational purposes and medical treatment, no TCS will be applicable for amounts up to Rs. 7 lakh in a financial year.
On educational expenditures exceeding seven lakh rupees through loans, a TCS of 0.5 percent will be charged,
while spending more than seven lakh rupees on medical treatment will incur a TCS of five percent.
The Financial Bill 2023 introduced by the central government brought about several changes.
The TCS rate was increased from 5 percent to 20 percent on the purchase of foreign tour packages using remittances under Liberalized Remittance Scheme (LRS).
Furthermore, the previous limit of Rs. 7 lakh for such purchases has been removed.
The Finance Ministry stated in its official statement that, based on suggestions received, some amendments have been made to the rules.
Currently, there are no changes to the TCS rates for the purchase of foreign tour packages and other transactions under LRS,
regardless of the payment method used. The previous limit of up to Rs. 7 lakh remains unchanged.