New Delhi: The Finance Ministry said on Wednesday that the implementation of the increased Tax Collected at Source (TCS) on overseas spending would be delayed by three months from the initial deadline of July 1.
The finance ministry stated that transactions made using international credit cards during travel abroad would not be considered within the scope of the Liberalised Remittances Scheme (LRS).
Consequently, these transactions would not be subject to TCS even after October 1.
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 2023 e-gazette 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. The Press Release dated May 19 2023 stands superseded, the ministry said in a statement.
After weeks of uncertainty surrounding the enforcement of the elevated Tax Collected at Source (TCS) rate of 20 percent on specific transactions, the finance ministry has provided a clarification on the matter.
It has been represented that payments for foreign tours through credit cards are not being captured under the Liberalised Remittance Scheme, Sitharaman had said on March 24.
The Reserve Bank is being requested to look into this with a view to bring credit card payments for foreign tours within the ambit of LRS and tax collection at source thereon, she had explained.
The decision to include credit card payments for foreign tours under the Liberalised Remittances Scheme (LRS) was prompted by the proposed increase in tax collection at source for overseas packages in the Union Budget for 2023-24.
The budget proposed raising the tax collection at the source rate from 5 percent to 20 percent.
