The Indian government has reversed its previous decision of levying a tax on credit card spends outside India. Prime Minister Narendra Modi’s government announced on Wednesday that it will defer the inclusion of international credit card spends outside India under the Liberalised Remittance Scheme (LRS). This means that currently, there will be no Tax Collected at Source (TCS) imposed on international credit card spends outside India.
TCS rates implementation date postponed
The Indian government has extended the timeline for implementing the higher proposed TCS rates, which will now come into effect on October 1 instead of July 1 of this year.
This delay is reportedly due to concerns raised by banks regarding the readiness of their reporting systems to implement the different TCS rates for various categories such as medical expenses, education, and overseas tour packages.
The inclusion of international credit card spends outside India under the LRS will also stand delayed.
TCS rates implementation date postponed: What the government said?
In a statement released on Wednesday, India’s finance ministry said that the decision was made after discussions with stakeholders and considering their comments and suggestions.
The ministry stated, “The increase in TCS rates, which were initially set to be effective from July 1, 2023, will now be implemented from October 1, 2023, with the modification mentioned above. Until September 30, 2023, the previous rates (prior to the amendment by the Finance Act 2023) will continue to apply.”
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The extension of the TCS rate implementation is intended to give banks and card networks sufficient time to establish the necessary IT-based solutions, it added.
TCS rates: The law that guides revised Tax Collection at Source
Through the Finance Act 2023, the government proposed amendments to increase the TCS rate from 5 per cent to 20 per cent for remittances under the Liberalised Remittance Scheme.
This part of the amendment was originally scheduled to take effect from July 1, except for remittances for education or medical purposes, which remained unchanged.
Under the LRS, all resident individuals, including minors, can remit up to US $250,000 (approximately ₹2.06 crore) abroad per year without prior approval from the Reserve Bank of India (RBI).
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