In a recent announcement by the government, debit and credit card users have received a positive development.
The Finance Ministry has revealed that individuals who spend up to seven lakh rupees overseas in a financial year
using their debit or credit cards will no longer be subjected to TCS (Tax Collected at Source).
Finance Ministry Addresses Concerns
Responding to criticism from various sources, the Finance Ministry stated that this decision aims to clarify the Reserve Bank’s Liberalized Remittance Scheme (LRS) and TCS procedures.
Just last week, the ministry had decided to include expenses made through international credit cards within the scope of the LRS.
Exemption Limit Raised to Rs 7 Lakh
Previously, individuals spending abroad faced a 20% TCS on expenses exceeding the limit of seven lakh rupees.
This move had received strong opposition from experts and concerned parties. To address the procedural ambiguities,
the Ministry has now decided to exclude expenditures up to seven lakh rupees made overseas through international debit or credit cards
from the Liberalized Remittance Scheme. As a result, no TCS will be deducted for such expenses.
TCS Exemption for Education and Healthcare Continues
It is important to note that currently, TCS is not levied on expenses up to seven lakh rupees for education and healthcare purposes abroad.
A five percent TCS is applied to such expenditures. The Ministry confirmed that the existing facility regarding TCS will remain intact for payments related to education and healthcare.
RBI Urges Government Action
The government’s attention was drawn to the issue when data from companies facilitating international money transfers revealed
that international credit cards were being issued with spending limits exceeding the current LRS cap of Rs 2.50 lakh.
In response, the Ministry stated that the Reserve Bank of India (RBI) had consistently urged the government to eliminate the differential treatment of foreign debit and credit payments.