According to the new regime, any individual spending up to Rs 7 lakh annually under the Liberalised Remittance Scheme — a $250,000 annual purse for overseas spends — will not have to pay TCS. Beyond that, separate rates have been prescribed, ranging from 0.5% for education spends based on loans to 20% for several other categories. The rule will apply to all modes of payment, the finance ministry said in a late evening statement.
Those purchasing a tour package for foreign travel using their credit cards, while they are in India, will be covered by LRS and need to deposit 5% as TCS for a package that costs up to Rs 7 lakh and 20% beyond that.
The move to sharply increase the TCS, announced in the budget, has been heavily criticised with even government officials admitting that it is too steep. The travel industry has raised concerns as they fear Indian agencies will be hit hard. Besides, banks had highlighted several gaps and had sought a postponement as their information technology systems were not ready, as reported by TOI on Saturday.
North Block acknowledged the concerns and deferred the implementation of the new regime to October, instead of July 1, proposed earlier. “In response to the comments and suggestions it has been decided to make suitable changes… It has also been decided to give more time for the implementation of the revised TCS rates and for inclusion of credit card payments in LRS,” the official release said.
Under the annual $250,000 LRS, an individual can undertake multiple spends including investments, education, medical treatment, foreign travel and maintenance of relatives overseas. The government has argued that several individuals are remitting money which is not in line with their disclosed levels of income, necessitating a trail of the transfers, for which TCS is levied.
The finance ministry said it would issue a fresh set of FAQs and made the necessary legal changes in the coming days.
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