Finance Ministry Exempts International Card Payments up to Rs 7 Lakh from LRS Limits and TCS!!

In response to concerns raised regarding the applicability of Tax Collection at Source (TCS) to small transactions made under the Liberalised Remittance Scheme (LRS) starting from July 1, 2023, the Finance Ministry has clarified its stance. The Ministry stated that individuals using international debit or credit cards for payments up to Rs 7 lakh per financial year will be exempt from the LRS limits and will not be subject to any TCS charges. This announcement follows the recent decision by the ministry to include international credit card spending in the RBI's Liberalised Remittance Scheme, which led to criticism due to the introduction of a 20% TCS levy.

According to The Indian Express, the Ministry of Finance issued a statement addressing the concerns and stating that to eliminate any ambiguity in the procedures, payments made by individuals using their international debit or credit cards, within the limit of Rs 7 lakh per financial year, will not be considered within the purview of the LRS limits. Therefore, such transactions will not attract any Tax Collected at Source.

To implement this decision, the Central government, in consultation with the Reserve Bank of India, amended the rules under the Foreign Exchange Management Act. As a result, international credit card spending outside India will fall under the Liberalised Remittance Scheme and will be subject to a higher TCS rate of 20% starting from July 1.