FEMA rules changed to bring parity between debit and credit cards: Finance Ministry
New Delhi. Using credit card abroad is going to be heavy on your pocket. The rules related to this have been changed. After this change, now you will have to pay 20% Tax Collection at Source (TCS) on the credit card spends in other countries. Following the advice of the Reserve Bank of India (RBI), the government has given the green signal to these changes. The new rules will be applicable from July 1.
In a statement issued on Thursday, the Finance Ministry said that through the Foreign Exchange Management (FEMA) Amendment Rules, 2023, the expenditure incurred abroad through credit cards has also been included in the LRS scheme of RBI. This will enable ‘tax collected at source’ (TCS) at the applicable rates on the amount spent abroad. According to the ministry, if the person paying TCS is a taxpayer, he can claim credit or set-off against his income tax or advance tax liabilities.
The Ministry had issued a notification in this context informing about the amendment in the FEMA Act. Post inclusion of LRS in this notification, any remittance of foreign currency above Rs 2.5 lakh will require RBI approval. Prior to this notification, international credit card payments for expenses incurred while traveling abroad were not eligible for LRS. The Finance Ministry, in a notification issued after consultation with RBI, has omitted section seven of the FEMA Act, 2000. With this, international credit card payments abroad have also come under the ambit of LRS.
It is noteworthy that this year, in the Union Budget 2023-24, it was proposed to increase TCS from five per cent to 20 per cent on foreign tour packages and money sent abroad under LRS. The Finance Ministry has said the objective of amending the FEMA Act to bring international credit card spends abroad under LRS is to bring uniformity in tax aspects of debit and credit card remittances.
Read the Latest India News Today on The Eastern Herald.
