Credit card spends may be brought under LRS after May 2024
Spending of Indians via credit cards abroad will likely be brought under the Liberalised Remittance Scheme (LRS) in FY25 after the general elections in May next year if the Narendra Modi government is voted back to power, sources told FE.
In June, the Centre changed its Budget 2023-34 decision to bring such credit card spending outside India under LRS, thereby exempting such spending from the levy of Tax Collected at Source (TCS) for now.
“There is no doubt that credit card spending outside India will be brought under LRS sometime next year,” an official told FE.
The government has found that international credit cards are being issued with limits in excess of the present LRS limit/person of $2,50,000/annum. Due to the exemption of international accredit cards from the LRS limit, expenditures through credit cards by individuals exceed the LRS limits and drain forex reserves.
On June 28, the finance ministry said the new threshold of Rs 0.7 million per financial year per individual will be there for TCS on all categories of LRS payments, through all modes of payment, regardless of the purpose. Beyond this Rs 0.7 million threshold, TCS shall be levied at the rate of 0.5% if remittance for education is financed by an education loan, 5% in case of remittance for education/medical treatment and 20% for others.
On the purchase of overseas tour packages, TCS of 5% will be applicable on payments up to Rs 0.7 million. Above the Rs 0.7 million threshold, 20% TCS would be levied from October 1.
Currently, overseas tour packages and LRS spending attract 5% TCS and there is no threshold.
The changes in TCS rates were postponed to October 1 from July 1 this year amid banks raising concerns about the unpreparedness of their reporting
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