The Finance Ministry issued a clarification saying that the limit of spending up to 7 lakhs during the financial year from debit and credit cards has been excluded from LRS.
RBI LRS Scheme: After many criticisms, the Finance Ministry has given clarification on spending abroad with credit and debit cards under the LRS scheme. On behalf of the Finance Ministry, it has been said that during the financial year, there will be no tax on spending abroad through debit and credit cards up to Rs 7 lakh.
The Finance Ministry said in its statement that debit and credit card payments up to Rs 700,000 will be kept out of the Liberalized Remittance Scheme (LRS) and TCS will not be charged from July 1. A few days ago, it was decided to bring the expenses incurred through international credit cards under the Liberalized Remittance Scheme. Under this, 20 percent TDS was imposed on the expenditure.
Tax exemption on studies and treatment abroad
The ministry’s move assumes significance as the Union Budget removed the Rs 700,000 limit for Tax Collection at Source (TCS) on foreign exchange purchases under LRS with effect from July 1, while increasing the tax rate from 5 per cent to 20 per cent, except for education, medical The percentage has been done.
Changes will be issued separately
The Finance Ministry said in its statement that it has been done due to the ambiguity spread about the expenses incurred abroad from debit cards and credit cards. This has been excluded from LRS, hence no TCS. The ministry said that necessary changes in the rules (Foreign Exchange Management, Current Account Transactions Rules, 2000) will be issued separately.
What is the rule now
At present, online purchases of goods and services in foreign currency by individuals attract a TCS deduction of 5 per cent above a limit of Rs 700,000. If this payment is made in Indian Rupees, then no TCS charge will be taken on it. It was anyway outside TCS liability and will not come under TCS even after 1st July.
Welcome the decision
Experts welcomed the decision to retain the Rs 700,000 limit for TCS on foreign exchange purchases after July 1. According to Exters, even international payments smaller than this could be subject to TCS and taxpayers could be seriously affected. Now this will not happen.
