The Finance Ministry announced on Wednesday that there would be no changes in the tax collection at source (TCS) for all purposes under the liberalised remittance scheme (LRS) for overseas travel tour packages, regardless of the mode of payment, for amounts up to Rs 7 lakh per individual per annum. The previously proposed hiked TCS rates, which had sparked protests, will now become applicable from October 1 instead of the initially planned date of July 1.
In May, the government issued the Foreign Exchange Management (Current Account Transactions) (Amendment) Rules, 2023, to eliminate the differential treatment for credit cards compared to other modes of foreign exchange withdrawal under LRS. The move gave way for the government to charge a whopping 20 per cent on overseas transactions over Rs. 7 lakhs, including credit card spending. However, following concerns raised by banks and financial institutions, the government engaged in discussions with stakeholders. As a result, it was decided to extend the implementation timeline for revised TCS rates and the inclusion of credit card payments in LRS to allow banks and card networks sufficient time to establish the necessary IT-based solutions.
The revised TCS rates will now come into force from October 1. This decision was made in consultation with stakeholders, considering the need for adequate time to implement appropriate IT infrastructure by banks and card networks.