New Delhi [India], May 18 : Tax Collected at Source (TCS) for spending through international credit cards under RBI's Liberalised Remittance Scheme on overseas tour packages and any other remittance (such as for bonds, shares, and real estate gifts) will be exempted within the annual limits of USD 250,000, the government clarified on Thursday.
TCS for these cases, when it crosses USD 250,000 per fiscal, will be now at 20 per cent from July 1, against the earlier 5 per cent.
The Finance Ministry said the changes were necessitated as some instances have come to notice where the LRS payments were "disproportionately high" when compared to the disclosed incomes.
The new rules under LRS doesn't change anything except bringing parity between the usage of debit and credit cards abroad.
By bringing TCS on credit card under LRS, the government aims at plugging the loophole. Earlier, expenditures through credit cards were not accounted for under the specified LRS limit, which had led to some individuals exceeding the annual limits.
The differential treatment between debit cards and credit cards is sought to be removed through the changes.
Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April - March) for any permissible current or capital account transaction or a combination of both.
The scheme was introduced on February 4, 2004, with a limit of USD 25,000. The LRS limit has been revised in stages consistent with prevailing macro and micro economic conditions. There are no restrictions on the frequency of remittances under LRS.
IT sector workers going on company or business trips will be unaffected by the new provisions that apply largely to the rich for buying property, shares and foreign travel.
The new provisions will not apply on payments for 'education' and 'medical' purposes and do not impact changes in the use of international credit cards by residents while in India.
The Centre on Tuesday brought international credit card spending outside India under the Liberalised Remittance Scheme (LRS) and issued an explainer on Wednesday to clear any confusion.
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