New rules for your credit card: Government announced 20% TCS, know the new rules
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The Government of India has decided to levy 20 per cent tax collected at source on credit card usage outside the country (abroad). This rule has been changed by the Center after consultation with the Reserve Bank of India (RBI).
The government gave this information through notification. It has been decided to bring the expenses incurred abroad on international credit cards under the ambit of LRS. The indirect effect of this would be that TCS would be levied. That is, it will be shown in the total tax liability. This is similar to the way ITC is available in GST.
What does the notification say-
The Finance Ministry said in the notification that the Liberalized Remittance Scheme (Liberalized Remittance Scheme (LRS)) in the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023 (Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023) International Will cover credit card payments.
The notification states that Rule 7 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 (Foreign Exchange Management (Current Account Transactions) Rules, 2000) has been omitted, which provides for travel expenses outside India under LRS. does. Drives the use of international credit cards to perfection.
The notification brings credit card transactions outside India under LRS with immediate effect, under which more TCS will now be levied. According to the budget, it will come into effect from 1 July 2023.
Earlier, the use of credit cards abroad during travel did not come under the purview of LRS. This previously included debit cards, forex cards and bank transfers.
What this means for the common man- Credit cards used outside India will now attract TCS at a higher rate of 20 per cent from July 1. This is because credit card transactions done outside India will immediately come under the purview of LRS. Effect.
TCS of 5 percent will be levied on such transactions till July 1, except in the areas related to medical and education.
However, after July 1, a 20 per cent fee will be charged on all such transactions. Under the LRS scheme, Indian residents are allowed to remit up to $250,000 (approximately over Rs 2 crore) every year without any pre-approval from the Reserve Bank of India.
While computing the LRS limit of $250,000 per person in a financial year, the use of international credit cards by Indians for travel abroad or online international purchases was not included.
Protest on social media- Many people have expressed concern over this move of the government. This especially includes businessmen and people going abroad for work. A user named Ajay Roti tagged Nirmala Sitharaman and wrote that TCS should not be increased on international use of credit cards as this may affect many business trips, especially those incurred by the company. He further said that 20% TCS is too much. So this proposal should be left here.
Many users believe that 20 per cent TCS on credit card usage abroad will affect business. Meanwhile, most of the users posted memes to criticize the move.
Cleanliness of Ministry of Finance
The Finance Minister has issued a clarification regarding the tax levied on credit cards. The Finance Ministry has taken this decision to stop those who ignore LRS. LSR stands for Liberalized Remittance Scheme. It has been decided to trace all the expenses incurred under LRS.
Due to non-inclusion of credit card transactions abroad in LRS, many people used to exceed the limit of LRS. This decision has been taken to eliminate the difference between debit card and credit card. The Reserve Bank had recommended several times to include credit card transactions abroad in the LRS.
(pc rights of employees)
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