The government on Thursday sought to clarify its decision to bring overseas credit card spends under the Liberalised Remittance Scheme (LRS) for forex outgo, stating some individuals were exceeding the $2.5 lakh annual limit set for the cards under the scheme.
While debit card spends were covered under the LRS, data collected from top money remitters under the scheme revealed that international credit cards were being issued with limits in excess of the norm, the Finance Ministry said, adding that the central bank had urged the government a few times to remove this differential treatment.
The Ministry assured that the scheme will not cover bona fide business visits overseas by employees and said the imposition of 20% tax collection on source or TCS for foreign remittances will primarily impact tour travel packages, gifts to non-residents and domestic high net-worth individuals investing in assets such as real estate, bonds, stocks outside India.
“Instances have come to notice where the LRS payments are disproportionately high when compared to the disclosed incomes,” the Ministry said, stressing that there will be no change in the 5% TCS levied on medical or education expenses abroad, which are permitted up to ₹7 lakh a year.
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