Overseas spending using credit cards not to attract Tax Collected at Source: Finance Ministry

The government dropped plans to levy Tax Collected at Source (TCS) rate on overseas payments made through international credit cards and said such expenses will be included in the Liberalised Remittance Scheme (LRS) of the RBI.

The government on Wednesday dropped plans to levy TCS on overseas payments made through international credit cards and said such expenses will be included in the Liberalised Remittance Scheme (LRS) of the RBI.

The Finance Ministry has also deferred by three months the implementation of a higher Tax Collected at Source (TCS) rate of 20% on expenditures made under LRS and overseas tour packages till September 30. The new rates will come into effect from October 1.

In a statement, the ministry said to give adequate time to banks and card networks to put in place requisite IT-based solutions, the government has decided to postpone the implementation of its May 16, 2023, notification through which credit card expenses were brought under LRS.

The ministry also clarified that "transactions through international credit cards while being overseas would not be counted as LRS and hence would not be subject to TCS".

This means that the government has dropped plans to levy TCS on international credit card spending.

The Budget 2023-24 had raised TCS rates on LRS and foreign tour packages from 5% to 20%, effective July 1.

With Wednesday's announcement of deferment of a higher TCS rate, LRS spending above ₹7 lakh would attract 20% TCS from October 1.