In the interim budget, the government is expected to announce an exemption from TCS on overseas credit and debit card spending up to Rs.7 lakh per FY.
Reetu | Nov 21, 2023 |
Income Tax TCS Exemption on Rs. 7 lakh International Card spend likely in Interim Budget
In the interim budget, the government is expected to announce an exemption from tax collected at source (TCS) on overseas credit and debit card spending by an individual of up to Rs.7 lakh per financial year, according to a senior official.
The official said, a modification to the Income Tax Act would be included in the Finance Bill next year.
“The TCS exemption for the Liberalised Remittance Scheme (LRS) on any payments made by an individual using their international debit or credit cards up to Rs.7 lakh, which was announced earlier this year, must be legislated. It is not currently covered by the Income Tax Act and must be added to it. “Some legislation will be required,” said the official.
“This will be a Finance Bill amendment. It must be incorporated as an amendment to the Income Tax Act. It will be included in the Union Budget,” he stated.
Earlier this year, the government included credit cards in the LRS, imposing a 20% TCS on this type of transaction. Following strong criticism, the finance minister decided to exclude international spending of up to Rs.7 lakh from 20% TCS.
“To avoid any procedural ambiguity, it has been decided that any payments made by an individual using their international debit or credit card up to Rs.7 lakh per financial year will be exempt from the LRS limits and thus will not attract any TCS. Existing TCS treatment for education and health payments will also be maintained,” the finance ministry stated in a statement on May 19.
The exemption announcement is anticipated to be included in the future vote on account, which will take place before of the general elections in 2024.
“Since the upcoming budget is a vote-on-account, no other major tax-related announcements are likely,” the official went on to say.
A vote on account allows a government nearing the end of its tenure to cover its spending for a limited time until a full budget is passed.
In the Union Budget 2023, the government proposed increasing TCS on overseas packages from 5% to 20%. Credit cards had previously been excluded from LRS, whereas debit cards were included because they were tied to bank accounts. LRS can effortlessly monitor and cover bank account transactions. However, this distinction was abolished earlier in 2023 by a notification from the Ministry of Finance, placing credit cards on par for LRS purposes.
The 20% TCS on international deliveries was intended to go into effect on July 1, but it wasn’t until October 1.
During the Budget session of Parliament in March 2023, Finance Minister Nirmala Sitharaman stated that the Reserve Bank of India had been ordered to put credit card payments for foreign tours inside the ambit of the LRS because such payments escaped TCS.
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