The finance ministry issued a notification on Wednesday in which it said that the increased TCS rates will come into effect from 1 October this year giving an extension of three months as the earlier notification said that the increased rates will be applicable from 1 July this year.
The Union Government in the Budget this year announced certain changes to the system of Tax Collection at Source (TCS) on payments under the Liberalised Remittance Scheme (LRS) and on overseas tour program packages. These were to take effect from 1 July 2023 which now has been extended till 1 october 2023. It was also announced in March that credit card payments would be brought under the LRS. Numerous comments and suggestions were received which have been carefully considered.
In response to the comments and suggestions it has been decided to make suitable changes. Firstly, it has been decided that there will be no change in the rate of TCS for all purposes under LRS and for overseas travel tour packages, regardless of mode of payment, for amounts up to Rs. 7 lakh per individual per annum. It has also been decided to give more time for the implementation of the revised TCS rates and for inclusion of credit card payments in LRS.
Overseas expenses on credit cards exceeding ₹7 lakh will be subject to a 20 per cent TCS. However, if such expenses is incurred for medical or educational purpose, the TCS would be levied at 5 per cent. For those availing loans for overseas education, a lower TCS rate of 0.5 pr cent would be levied above the ₹7-lakh threshold.
The Union Budget 2023-24 had hiked TCS rates to 20 per cent, from 5 per cent currently, on overseas tour packages and funds remitted under LRS (other than for education and medical purposes). The new tax rates will come into effect from July 1, 2023.
In May, the government brought changes to the FEMA Current Account Transaction Rules and included overseas credit card expenses in the ambit of LRS (Liberalised Remittance Scheme), under which a resident can remit money abroad up to a maximum of USD 2.50 lakh per annum. Beyond the threshold, RBI approval would be required.
Updated: 28 Jun 2023, 09:26 PM IST