Shopping on foreign websites or subscribing to international magazines? TCS provisions may apply

International credit card (ICC) spending now comes under the liberalised remittance scheme (LRS) limit and a 20 percent tax collection at source (TCS) will also kick in from July 1 if the expenses abroad exceed Rs 7 lakh. While it's established now that travellers using ICC for booking holiday packages will face implications, it's important to note that TCS provisions will also apply if users shop from a foreign e-commerce website or subscribe to an international magazine and make payments in dollars using a credit card.

However, since the majority of users will not exceed the Rs 7 lakh per year threshold, a 20 percent TCS is unlikely to apply to most subscriptions, experts say.

Another thing, which Sandeep Sehgal, Partner- Tax at AKM Global, pointed out is that if payment is made by any other mode (other than debit and credit card), TCS will be applicable at 20 percent without any threshold.

Notably, the government on Friday announced that no tax will be charged on overseas spending of up to Rs 7 lakh in a year using debit or credit. The government had earlier brought overseas credit card spending under Liberalised Remittance Scheme (LRS). This meant that any spending using credit cards overseas would attract a 20 percent tax from July 1. Debit card spending was already part of LRS.

According to Naveen Wadhwa, DGM at Taxmann, payment for shopping on foreign e-commerce websites or subscribing to international magazines, if made from India in a foreign currency, TCS will apply even if the threshold of Rs 7 lakh is not breached. However, he added, that more clarity on this is awaited.

Wadhwa stressed that relief from TCS will be available only if the international debit or credit card is used for overseas spending up to Rs 7 lakh while the payer is outside India.

"Use of international debit or credit card will not provide any relief if the payment is made while sitting in India. If one pays for these goods or services for personal purposes in rupees, the TCS shall not apply irrespective of the amount of payment. Websites like ChatGPT accepts payment only in the dollar, in such cases the TCS shall apply. Websites like Canva.com, Google.com or Twitter.com accept payment in rupee, the TCS shall not apply for such payments," Wadhwa told CNBC-TV18.com.

Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP, said the exclusion of cases involving payments by an individual using an international debit or credit card up to Rs 7 lakh per financial year from LRS-TCS limits, is a welcome move and would bring some relief to family and leisure travellers.

However, it still remains low for frequent business travellers, who may still look forward to a higher exemption limit, even though the base protection from TCS if expenses are borne by the employer, is available.

Additionally, tax experts have sought more clarity on the limits, saying it would be difficult for the I-T department to differentiate between personal and business visits.