Payments made by using worldwide bank cards (ICC) throughout abroad visits will not attract Tax Collected at Source (TCS), as per a notification issued by the finance ministry on Friday evening.
Putting at relaxation the controversy over utilization of ICC, the Ministry amended the Foreign Exchange Management (Current Account Transactions) Rules, 2000, on Friday to exclude ICC from the purview of the Reserve Bank’s Liberalised Remittance Scheme (LRS) which attracts TCS past a threshold at specified charges.
“…the use of ICC for making payment by a person towards meeting expenses while such person is on a visit outside India” will not be coated underneath LRS, the notification mentioned whereas inserting Rule 7 in FEM (CAT) Rules.
The modification can be efficient retrospectively from May 16, the ministry mentioned in a notification.
The modification reverses a May 16 notification by the ministry which omitted Rule 7 from FEM (CAT) Rules, thereby successfully together with foreign exchange spend by ICCs underneath LRS.
Under LRS, a resident can remit cash overseas up to $250,000 each year. Any remittance past this is able to require approval from the RBI.
Also, remittances underneath LRS are topic to TCS. Bringing ICC spends inside LRS would have elevated the compliance burden for banks.
Following the May 16 change in FEM (CAT) Rules, issues had been raised by the general public over its influence.
In an announcement on June 28, the ministry had mentioned that “to give adequate time to banks and card networks to put in place requisite IT-based solutions, the government has decided to postpone the implementation of its May 16, 2023, notification”.
Transactions by ICCs whereas “being overseas would not be counted as LRS and hence, would not be subject to TCS”, the ministry had mentioned.
