After Outcry, Govt Says No TCS On Forex Card Payments Up To Rs 7 Lakhs A Year, But It Might Not Be Of Much Help
Faced with heavy criticism from various corners, including many high-profile personalities who are known to be close to the BJP, the Union Finance Ministry has amended rules under the Foreign Exchange Management Act (FEMA) to bring international credit card spending under the Liberalised Remittance Scheme (LRS).
What is the amendment?
The Finance Ministry on Friday announced that no tax will be charged on overseas spending of up to Rs 7 lakh in a year using debit or credit cards.
"To avoid any procedural ambiguity, it has been decided that any payments by an individual using their international Debit or Credit cards up to Rs 7 lakh per financial year will be excluded from the LRS limits and hence, will not attract any TCS," the Finance Ministry said in a statement.
This means that overseas payments exceeding Rs 7 lakh a year through international credit and debit cards will be subject to TCS levy at the rate of 20 per cent with effect from July 1.
TCS on overseas transactions?
Currently, overseas medical treatment and education expenses up to Rs 7 lakh a year is exempt from TCS. A 5 per cent levy is charged on expenses exceeding Rs 7 lakh.
For those who availed of education loans, the rate of TCS is 0.5 per cent.
The government had earlier brought overseas credit card spending under LRS, which meant that any spending using credit cards overseas would attract a 20 per cent tax from July 1.
TCS on Forex = tax terrorism?
The move to impose TCS on Forex transactions, however, had invited heavy criticism, with some even calling tax terrorism.
Many had also pointed out that India is the only country in the world that was seeking an upfront tax on any expenditure made during overseas trips that would impact foreign tourism.
You will still pay 20% extra upfront
While the Finance Ministry has said that annual spending below Rs 7 lakhs will not be taxed, people using their credit cards for foreign transactions will still end up paying 20 per cent extra.
A refund of this TCS can be claimed when filing the?annual I-T return after the end of the financial year by showing all known sources of income have been taxed.
However, you would not get the interest from the date of TCS but from 1st April of next year till the date of payment. The interest is paid at 6 per cent per annum if the refund is more than 10 per cent of your tax liability.
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