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The government on 19 May, in the face of opposition from taxpayers as well as businesses, blinked its plan to levy a 20% tax on foreign credit card spends from 1 July, and ₹7 lakh per financial year by an individual from its levy. International Debit or Credit cards up to Rs.
In a statement, the finance ministry said this is being done to remove “any procedural ambiguity” as “tax collection at source (TCS) for small transactions under the Liberalized Remittance Scheme (LRS) will be done from July 1.” Concerns have been raised about applicability. , 2023.
earlier this week, RBI introduces a new provision to capture foreign credit card spends under LRSWhich allows foreign exchange remittance of up to $2.5 lakh per year for individuals.
The government had separately notified that such foreign expenditure would also attract 20% tax collected at source, including adjustment of such levy against advance tax paid or refund at the time of filing annual tax return. will be demanded.
Responding to sharp criticism of the move, the ministry on Thursday issued a detailed explanation along with the rationale for the tax levy and said the move was mainly aimed only at tour travel packages, gifts to non-residents and domestic high net worth investors. Will affect people. In assets like immovable property, bonds, stocks outside India. “Instances have come to the fore where LRS paid is disproportionately higher than the disclosed income,” the report said.
On May 19, however, it partially backtracked, saying expenses up to ₹7 lakh per annum would neither come under LRS nor attract TCS. Necessary changes in the Foreign Exchange Management (Current Account Transactions Rules, 2000) Rules to facilitate the exemption of ₹7 lakh announced will be issued separately.
“The existing beneficial TCS treatment for education and health payments will also continue,” the ministry said. Such payments up to ₹7 lakh per annum are allowed with TCS rate of 5%.