homepersonal finance NewsCentre plans LRS on overseas credit card spends, awaits banks and card networks' readiness
Centre plans LRS on overseas credit card spends, awaits banks and card networks' readiness
The government has provided clarity on the regulation of overseas credit card spending, stating that such transactions will fall under the purview of the Liberalised Remittance Scheme (LRS) and Tax Collected at Source (TCS) once banks and credit card networks are fully prepared for the transition. CNBC-TV18 has learnt that any progress on this matter is likely to occur after October 2023.
The government has provided clarity on the regulation of overseas credit card spending, stating that such transactions will fall under the purview of the Liberalised Remittance Scheme (LRS) and Tax Collected at Source (TCS) once banks and credit card networks are fully prepared for the transition.
Recognising that it will be the first time credit cards are brought under the LRS, the government acknowledged that both banks and card networks need sufficient time to adjust their systems to facilitate the verification of transaction details effectively.
During an exclusive discussion with CNBC-TV18, Ajay Seth, the economic affairs secretary, highlighted two key aspects of this move. Firstly, it concerns determining the purpose of using credit cards overseas, as different rates of tax collected at source (TCS) are applicable based on the specific purpose of the transaction. The second aspect involves aggregating the spending limit of Rs 7 lakh, as any expenses within this limit will not be counted under the Reserve Bank of India's (RBI) LRS regulations.
CNBC-TV18 has learnt that any progress on this matter is likely to occur after October 2023.
Earlier, on June 28, the finance ministry had announced that some financial institutions had requested additional time to modify their existing IT systems to address issues arising from the implementation of TCS on credit card transactions. In response to these requests and to allow banks and card networks to develop the necessary IT-based solutions, the government decided to postpone the implementation of the May 16 e-gazette notification. Consequently, transactions made through international credit cards while overseas would not be considered as part of the LRS and, therefore, would not be subject to TCS during this period.
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