No TCS on overseas spending of up to Rs 7 lakh: Finance Minister

As per sources, the government on Friday announced that they will not be charging tax on overseas spending of up to Rs 7 lakh in a year using debit or credit cards. The decision came just after a few days when the decision of levying Tax Collection at Source (TCS) on all spending was declared.

As per sources, the spending money using an overseas credit card or debit card was already under Liberalised Remittance Scheme, which meant that any spending using credit card or debit card will levy 20 percent tax on it, with effect from July 1. Notably, the Debit card was already part of the Liberalised Remittance Scheme (LRS).

The government said on Friday night that no TCS will be deducted from purchases made abroad up to Rs 7 lakh using any debit or credit card.

The application of Tax Collection at Source (TCS) on “small transactions” under the Liberalised Remittance Scheme (LRS) beginning July 1, 2023, has drawn criticism. “To avoid any procedural ambiguity, it has been determined 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, as a result, will not attract any TCS,” the ministry stated.

According to the clarification provided by the government today, payments made overseas using foreign credit and debit cards that surpass Rs 7 lakh per year would be subject to a TCS levy at a rate of 20 percent starting on July 1.

TCS is not currently applied to costs for abroad medical care and education up to Rs 7 lakh per year. However, a 5 percent 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. “Existing beneficial TCS treatment for education and health payments will also continue,” the ministry said.

Tax experts also believed that the TCS rate of 20 percent was excessive. They also pointed out that India is the only nation in the world to request an upfront tax on any out-of-country purchases, which would harm international travel.

In addition to this, a return can be submitted for a TCS refund when the annual I-T return is submitted after the end of the fiscal year by demonstrating that all known sources of income have been taxed.