Implementation of increased tax on credit card payments on foreign tours postponed amid outcry [details]

The Finance Ministry on Wednesday stated that there will probably be no change in tax assortment at supply (TCS) for all functions beneath the liberalised remittance scheme (LRS) for abroad journey tour packages, regardless of the mode of fee, for quantities as much as Rs 7 lakh per particular person each year.

The hiked TCS charges would now grow to be relevant from October 1.

Earlier, there have been protests when authorities had introduced that the TCS charges could be hiked and are available into drive from July 1.

The fgvernment had notified the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 by an e-gazette notification dated May 16, to take away the differential remedy for credit playing cards vis-a-vis different modes of withdrawal of foreign alternate beneath LRS.

After considerations had been raised by banks and monetary establishments, the federal government consequently held discussions with numerous stakeholders, and it was determined to present extra time for the implementation of revised TCS charges and for the inclusion of credit card payments in LRS.

The increased TCS charges subsequently will now come into drive from October 1. It has now been determined after discussions with stakeholders that enough time could be given to banks and card networks to place in place requisite IT based mostly options.

The authorities has thus determined to postpone the implementation of its May 16, 2023 e-gazette notification. This would imply that transactions by worldwide credit playing cards whereas being abroad, wouldn’t be counted as LRS and therefore wouldn’t be topic to TCS. It has additionally been determined that the brink could be of Rs 7 lakh per monetary 12 months per particular person on all classes of LRS payments, by all modes of fee, regardless of the aim.

Thus, for first Rs 7 lakh remittance beneath LRS, there shall be no TCS. Beyond this Rs 7 lakh threshold, TCS shall be 0.5 per cent (if remittance for schooling is financed by schooling mortgage), 5 per cent (in case of remittance for schooling/medical remedy) and 20 per cent for others. For buy of abroad tour programme bundle, the TCS shall proceed to use on the fee of 5 per cent for the primary Rs 7 lakh per particular person each year.

The 20 per cent fee will solely apply for expenditure above this restrict, the Finance Ministry stated in an announcement.

(With inputs from IANS)