TCS of 20% on credit cards put on hold, forex cards get Rs 7-lakh exemption

A higher tax deducted at source or TCS of 20% on certain categories of overseas spends will now come into force from October 1, 2023, the finance ministry has said. This will apply to debit cards and forex cards. But if you use your credit card overseas, you will escape the TCS for now, until banks are ready with their IT infrastructure.

 

 

International payments made using your credit cards overseas will not attract 20 percent tax collected at source (TCS) for now, the finance ministry has said in a recent notification, rescinding its May circular that brought credit cards under the liberalised remittance scheme (LRS).

 

 

 

The government notification also clarifies that international remittances or payments (all put together) of up to Rs 7 lakh per financial year per individual will not attract any TCS ― up until September 30 and even afterwards. Bookings of overseas tour packages have a separate Rs 7 lakh threshold ― 5 percent TCS for spends up to Rs 7 lakh and 20 percent thereafter from October 1. This is irrespective of the mode of payment used.

 

 

 

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Earlier, a higher TCS rate of 20 percent, up from the current 5 percent, was to come into effect from July 1, 2023. This was introduced in Budget 2023. This will now be implemented from October 1. (see table for details)

 

 

 

The government has also provided some relief to those using foreign currency and forex cards on their foreign trips by bringing all modes of payment under the TCS exemption threshold of Rs 7 lakh.

 

 

 

Read More: CALCULATION OF HRA EXEMPTION UNDER SECTION 10(13A) OF INCOME TAX ACT, 1961

 

 

Ankur Mittal, Co-Founder, Cardinsider, a credit card comparison website, says, In the case of credit cards, it is clear that they will not be subject to TCS until the banks are ready with the necessary infrastructure. So, October 1, 2023, is not relevant for credit cards at the moment.”