The government has introduced 20% TCS on all international credit card transactions from July 1, 2023. Apart from this, spending in foreign exchange (forex) through international credit cards will also be covered under the RBI’s liberalised remittance scheme (LRS). Under the RBI LRS, a resident can remit money abroad up to a maximum of $250,000 per annum without the authorisation of the RBI.
What Will Be The Impact Of These Changes On You?
Sudhir Nayak, partner at Dhruva Advisors, said, “After the latest rule, if an individual already has exhausted the LRS limit of $2,50,000 and intends to travel abroad will need prior approval from the RBI for using his ICC meeting his expense.”
He added that if an individual has already exhausted the LRS limit of $250,000 and is abroad and using his ICC (international credit card) for meeting his expense, the amount spent on/ after May 16, 2023, by using ICC, will technically breach the LRS which mandates approval from RBI.
Earlier, the usage of international credit cards (ICCs) for making payments for fulfilling expenses during travel outside India was not included in the LRS limit.
Nayak also said it will be interesting to see the impact of the amendment on the usage of the corporate credit card issued in the name of the Individual employees.
“The amendment coupled with the 20% TCS effective from July 1, 2023, will discourage individuals from spending in forex,” he added.
What Are The Rule Changes?
According to a notification, the finance ministry, in consultation with the RBI, has omitted Rule 7 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, thus effectively including forex spending through international credit cards under the LRS.
Apart from this, the Union Budget 2023-24 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.
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