Tax Collection at Source (TCS) will not be deducted on expenses up to Rs 7 lakh in a financial year abroad through debit or credit cards. Amidst all the criticism, the Finance Ministry has given this clarification. Earlier this week, the finance ministry had decided to bring international credit card spends under the Liberalized Remittance Scheme (LRS). Under this, 20 percent TCS was imposed on the expenditure.
The ministry said, “In order to remove procedural ambiguity, it has been decided that expenditure up to Rs 7 lakh in a financial year abroad through international debit or credit cards will be excluded from the Liberalized Remittance Scheme and TCS will not be deducted.
What is the status now: At present, TCS is not deducted on expenses up to Rs 7 lakh for medical treatment and studies abroad. TCS is deducted at the rate of five per cent on such expenditure. The ministry said that the existing TCS facility for payments related to education and health will continue.
What is the purpose of the government: Earlier, the Finance Ministry had defended this decision. The Finance Ministry had said that the purpose of amending the FEMA Act to bring international credit card spends abroad under the purview of LRS is to bring uniformity in the tax aspects of debit and credit card remittances.
Explain that through the Foreign Exchange Management (FEMA) Amendment Rules, 2023, the expenditure incurred abroad through credit or debit cards has also been included in the LRS scheme of RBI.
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