The Union government tweaked the imposition of 20 percent Tax Collection at Source (TCS) on transactions through international credit cards and debit cards under the Liberalised Remittance Scheme (LRS) from July 1 by clarifying that the applicability will only be after a limit of Rs 7 lakh has been breached in a financial year.
Faced with massive social outrage, the Finance Ministry admitted that concerns have been raised about the applicability of TCS to small transactions under the Liberalized Remittance Scheme (LRS). “To avoid any procedural ambiguity, it has been decided that any payments by an individual using their international Debit or Credit cards upto Rs 7 lakh per financial year will be excluded from the LRS limits and hence, will not attract any TCS,” it said in a statement.
It also clarified that the existing beneficial TCS treatment for education and health payments will also continue.
The necessary changes to the Rules (Foreign Exchange Management (Current Account Transactions Rules), 2000) will be issued separately, and added to the Finance Ministry statement.
Earlier, several analysts had termed the blanket imposition of TCS as a disaster because it would have been a compliance nightmare for many traveling for tourism. They pointed out that rather than being an indirect measure to support the domestic tourism industry which was the worst hit during the pandemic, it would actually discourage many residents from traveling overseas.
(With inputs from agencies)
