20% TCS on Credit Card: International Credit Card spending outside India would come under the Liberalised Remittance Scheme (LRS) from May 16, 2023. Spending with international credit cards will also attract a higher rate of Tax Collected at Source (TCS) at 20 % effective July 1, 2023.
The Central Government on Tuesday (May 16, 2023) notified the amended rules under the Foreign Exchange Management Act (FEMA), which has brought credit card spending outside India under the LRS. The amended rule would be applicable from July 1, 2023.
While the move is expected to help track high-value overseas transactions, the Government’s decision to impose 20% TCS on international credit card spending has caught the attention of Twitterati as “20% TCS” was one of the top trending topics on the social media. platform on Thursday morning. The topic is being discussed since Wednesday itself as the notification came late at night on Tuesday.
“This is big. By removing rule 7, this changes the game. Every international credit card transaction, from today, made by an individual => will be under LRS limits. Means 5% TCS till July 1. And 20% Tax collected at source after that. (Can be adjusted against other taxes),” tweeted Deepak Shenoy, Founder and CEO of Capital Mind.
The “20% TCS” decision has also received a lot of flak from several Twitter users.
Key Points and Applications
- Credit card transactions by individuals abroad will be subject to the annual LRS limit of $2,50,000. Any higher spending would require prior approval from the Reserve Bank of India (RBI), The Financial Express reported today.
- International credit card transactions will also attract TCS at the rate of 20% from July 1. The TCS rate till June 30 is 5%.
- The use of credit cards by Indian users on foreign visits has come under the ambit of LRS effective May 16, 2023. The LRC is overseen by RBI.
(More details soon)