New TCS norms for LRS to be come into effect from Oct 1
The notification on spending through International Credit Card abroad as a part of LRS (Liberalised Remittance Scheme) issued by the Finance Ministry will continue to be in abeyance, a senior official of the ministry said on Thursday. Meanwhile, the newly-introduced Tax Collected at Source (TCS) mechanism for Liberalised Remittance Scheme (LRS) is scheduled to be implemented from October 1.
Under LRS, all resident individuals, including minors, are allowed to freely remit up to $250,000 per financial year (April тАУ March). This can be for any permissible current or capital account transaction, or a combination of both. Spending under LRS beyond a certain threshold is subjected to Tax Collected at Source (TCS).
The Government had notified Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 vide an e-gazette notification dated May 16, 2023 to remove the differential treatment for credit cards vis ├а vis other modes of drawal of foreign exchange under LRS. However, on June 29 it was announced that to give adequate time to banks and card networks to put in place requisite IT based solutions, the Government has decided to postpone the implementation of its May 16 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.
тАШNo fixed time frame regarding govtтАЩs call on int credit card usageтАЩ
Along with this, it was also decided that increased TCS rate for overseas travel package and expenses other than education and medical purposes will be implemented from October 1 as against original date of July 1. As the government is getting ready to make increased TCS rate effective from the new date , when businessline enquired about treatment regarding usages of International Credit Card (ICC), a senior Finance Ministry official said тАЬNo date has been fixed for that.тАЭ
0.5% TCS rate for up to тВ╣7 lakh expenditure on overseas education financed by loans
Meanwhile, there is also no change in guidelines for TCS as announced on June 30. It was said that remittance for purpose of education would include purchase of tickets of the person undertaking study overseas for commuting between lndia and the overseas destination, tuition and other fees to be paid to the educational institution and other day-to-day expenses required for undertaking such study.
There is no TCS in case of expenditure up to тВ╣7 lakh in a year for education, financed by loans after this threshold and the TCS rate is 0.5 per cent. In case of self-financed remittance, the threshold will be same, but the applicable TCS rate is 5 per cent.
Now, 5% TCS on overseas tour expenses up to тВ╣ 7 lakh and 20% for more than тВ╣ 7 lakh
On medical expense, remittance for the purpose of medical treatment will include purchase of tickets of the person to be treated medically overseas (and his attendant) for commuting between India and the overseas destination, his medical expense; and other day-to-day expenses required for such purpose. TCS on LRS for medical treatment is NIL for expenses upto тВ╣ 7 lakh, but 5 per cent for more than тВ╣7 lakh.
As per the June 30 notification of the Finance Ministry, the term тАШoverseas tour program packageтАЩ will not mean just purchase of only international travel ticket or purchase of only hotel accommodation. тАЬTo qualify as тАШoverseas tour program packageтАЩ, the package should include at least two of the followings:- (i) international travel ticket, (ii) hotel accommodation (with or without food)/boarding/lodging, (iii) any other expenditure of similar nature or in relationтАЭ. As on date, the rate of TCS on buying overseas tour package is 5 per cent with threshold. However, from October 1, the rate would be 5 per cent for expenses up to тВ╣ 7 lakh and 20 per cent for more than тВ╣ 7 lakh.
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