20% TCS regime from October 1; no TCS on use of international credit cards while overseas

Government has decided to give more time for the implementation of the revised TCS rates and for inclusion of credit card payments in LRS.

The new TCS rates are applicable from October 1 instead of July 1 and use of international credit cards while abroad has been excluded from the liberalised remittance scheme and will not be subject to TCS, at least for now.

As per a government statement ,” To give adequate time to Banks and Card networks to put in place requisite IT based solutions, the Government has decided to postpone the implementation of its 16th May 2023 e-gazette notification. This would mean that transactions through International Credit Cards while being overseas would not be counted as LRS and hence would not be subject to TCS. The Press Release dated 19th May 2023 stands superseded. “

The earlier Rs 7 lakh threshold exemption for LRS and TCS will also be restored and the Finance Act amendments which had withdrawn this will stand nullified with legislative amendments .

The Finance Ministry has said, “Legislative amendment in this regard shall be proposed in due course. Circular and Frequently Asked Questions (FAQs) shall be issued to clarify various practical issues in implementing this provision”.

All remittances , except overseas tour packages, will attract Nil TCS upto Rs 7 lakh. For overseas tour packages however, five percent TCS will be levied upto Rs 7 lakh spend. And beyond Rs 7 lakh 20 percent TCS will apply. Under LRS for other purposes too, the TCS rate will increase to 20 percent from the current five percent from October 1. While health and education remittances will continue at the earlier five percent or 0.5 percent rates as the case maybe, beyond the Rs 7 lakh threshold.

“Till 30th September, 2023, earlier rates (prior to amendment by the Finance Act 2023) shall continue to apply, and 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 Finance Ministry statement said.