The Finance Ministry on Wednesday said that there will be no change in tax collection at source (TCS) for all purposes under the liberalised remittance scheme (LRS) for overseas travel tour packages, regardless of the mode of payment, for amounts up to Rs 7 lakh per individual per annum.
The hiked TCS rates would now become applicable from October 1.
Earlier, there were protests when government had announced that the TCS rates would be hiked and come into force from July 1.
The fgvernment had notified the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 through an e-gazette notification dated May 16, to remove the differential treatment for credit cards vis-a-vis other modes of withdrawal of foreign exchange under LRS.
After concerns were raised by banks and financial institutions, the government consequently held discussions with various stakeholders, and it was decided to give more time for the implementation of revised TCS rates and for the inclusion of credit card payments in LRS.
The increased TCS rates therefore will now come into force from October 1. It has now been decided after discussions with stakeholders that adequate time would be given to banks and card networks to put in place requisite IT based solutions.
The government has thus decided to postpone the implementation of its May 16, 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. It has also been decided that the threshold would be of Rs 7 lakh per financial year per individual on all categories of LRS payments, through all modes of payment, regardless of the purpose.
Thus, for first Rs 7 lakh remittance under LRS, there shall be no TCS. Beyond this Rs 7 lakh threshold, TCS shall be 0.5 per cent (if remittance for education is financed by education loan), 5 per cent (in case of remittance for education/medical treatment) and 20 per cent for others. For purchase of overseas tour programme package, the TCS shall continue to apply at the rate of 5 per cent for the first Rs 7 lakh per individual per annum.
The 20 per cent rate will only apply for expenditure above this limit, the Finance Ministry said in a statement.
(With inputs from IANS)
