FEMA rules changed to bring parity in debit, credit cards for spending abroad: Finance Ministry
[ad_1]
The Finance Ministry said in a statement on Thursday that through the Foreign Exchange Management (FEMA) Amendment Rules, 2023, spending abroad through credit cards has also been included in the LRS scheme of the Reserve Bank of India (RBI).
The Finance Ministry has said that the purpose of amending the FEMA Act to bring international credit card spends abroad under the ambit of the Liberalized Remittance Scheme (LRS) is to bring uniformity in the tax aspects of debit and credit card remittances. should bring. The Finance Ministry said in a statement on Thursday that through the Foreign Exchange Management (FEMA) Amendment Rules, 2023, spending abroad through credit cards has also been included in the LRS scheme of the Reserve Bank of India (RBI).
This will enable ‘tax collected at source’ (TCS) at the applicable rates on the amount spent abroad. If the person paying TCS is a taxpayer, he can claim credit or set-off against his income tax or advance tax liabilities. In this year’s budget, it was proposed to increase TCS from five per cent to 20 per cent on foreign tour packages and money sent abroad under LRS. The new tax rate will be effective from July 1. The Ministry had issued a notification in this context last Tuesday informing about the amendment in the FEMA Act. Post inclusion of LRS in this notification, any remittance of foreign currency exceeding $2.5 million will require RBI approval.
Prior to this notification, international credit card payments for expenses incurred while traveling abroad were not eligible for LRS. The Finance Ministry, in a notification issued after consultation with RBI, has omitted section seven of the FEMA Act, 2000. With this, international credit card payments abroad have also come under the ambit of LRS. The Ministry has tried to clarify the situation by releasing a list of related questions and their answers on this change.
It said debit card payments were already covered under the LRS but credit card expenses abroad did not come under this limit. Because of this many people used to cross the LRS limit. Data obtained from overseas money remittance companies revealed that international credit cards are being issued with spending permissions in excess of the existing LRS limit of $2.50 lakh. According to the ministry, the RBI had also written to the government several times that the differential treatment of foreign debit and credit payments should be done away with. A total of $ 19.61 billion was sent out under LRS in the financial year 2021-22, while in the year 2020-21 this figure was $ 12.68 billion. In the last financial year 2022-23, this amount increased to $ 24 billion.
In the list of questions and answers, the ministry has clarified that five per cent TCS will be levied on foreign expenditure of more than Rs 7 lakh on medical treatment and education. At the same time, investment in real estate and travel abroad will attract 20 percent tax. Those taking loans for education abroad will be charged TCS of 0.5 per cent at a lower rate, above the limit of Rs 7 lakh.
Disclaimer:IndiaTheNews has not edited this news. This news has been published from PTI-language feed.
[ad_2]
Source link
