Credit card spending abroad exempted from TCS, announces Finance Ministry

The Indian government has announced its decision to exempt tax collected at source (TCS) on overseas credit card spending by excluding it from the Liberalised Remittance Scheme (LRS). Initially, credit card payments were planned to be included in the LRS, but changes to the TCS system were made in the recent Union Budget, set to take effect from July 1, 2023. However, the implementation of these changes has now been postponed to October 1, 2023, to allow banks and card networks sufficient time to establish necessary IT-based solutions.

According to the Ministry of Finance, the decision was influenced by the numerous comments and suggestions received, prompting the government to provide additional time for the required infrastructure to be put in place. Consequently, transactions made through international credit cards while abroad will not be considered as part of the LRS and will not be subject to TCS.

The TCS rates remain unchanged for all LRS-related purposes, irrespective of the payment mode, up until September 30. For individuals, the TCS on overseas tour packages will continue to be 5% for transactions up to Rs. 7 lakh per annum until September 30. However, from October 1, 2023, the TCS rate on overseas tour packages for individuals spending above Rs. 7 lakh per annum will increase to 20%.

In summary, the government's decision to exclude overseas credit card spending from the LRS and postpone the implementation of changes to TCS aims to provide banks and card networks with sufficient time to establish the necessary IT solutions. The TCS rates remain unchanged until September 30, after which the TCS rate on high-value overseas tour packages will increase.