20% TCS on International Credit Card Usage FAQs: What Is Exemption Limit for Students or Medical Purposes? Know Everything Here

Mumbai, May 18: A day after the amendment of the Foreign Exchange Management (FEMA) Rules, Twitter was ransacked with posts related to International Credit Card Usage. Soon, the term "20% TCS" started trending on Twitter on Thursday. To the unversed, the Centre on Wednesday notified the amended rules under FEMA, which brought international credit card (ICC) spending under the RBI's liberalised remittance scheme (LRS). On Thursday, Finance Ministry issued an FAQ wherein they explained the new International Credit Card Usage rules neatly. 20% TCS on Credit Card: Centre Announces 20% Tax Collection at Source on Credit Card Usage Outside India, Netizens Unhappy.

Under the new rules, a 20% tax will be levied on all such transactions from July 1, 2023. Earlier, international credit card swipes were exempt from TCS since they were not included in the LRS limit. Accordingly, an individual would need approval from RBI if they wish to spend more than $250,000. And now, foreign credit card transactions will attract TCS at the rate of 20% from July 1, up from 5% currently. International Credit Card Spend Exempted Under RBI's Remittance Scheme Within Annual Limit.

Finance Ministry Tweeted:

20% TCS FAQs:

• Why TCS required to be collected?

Section 206C of the Income-Tax Act 1961 provides for TCS is the business of moding in alcohol, liquor, forest produce, scrap etc, Sub-section (1G) of the aforesaid section provides for TCS on foreign romittance through the Liberalised Remittance Scheme and on the sale of overseas tour packages.

• Is TCS applicable to all remittances made abroad?

No. Only such remittances which are covered under LRS are liable to TCS. These have been detailed in the answer to Q (5) in Part B of the clarifications.

• What is the reason behind the increase in rates of TCS?

1. The payment of TCS is not a final tax.
2. If the TCS payee is a taxpayer, he can claim credit for the TCS as his tax payment against regular income and adjust it against the advance tax etc., payments accordingly.
3. If the TCS is of a person not being a taxpayer, then the 20% rane on such presumed income is not high The tax rate slab of 20% starts in the new regime for incomes over ₹12 lacs and is 30% for incomes over ₹15 lacs.
4. Instances have come to notice where the LRS payments are disproportionately high when compared to the disclosed incomes.

• What is the impact on travel and incidental expenses related to education and medical treatment?

For TCS on remittance for travel and incidental expenses related to education and medical treatment, the rates of TCS as applicable to remittances for education and medical treatment, respectively, shall apply. A detailed clarification will be issued separately.

Who Is Exempted? What Is the Exemption Limit?

Two categories - education and medical - have been exempted from 22 percent TCS on international credit card usage. According to reports, in these Categories, the TCS remains at 5% over a threshold of Rs 7 lakhs. In case of an education loan, it’s even lower at 0.5%.

(The above story first appeared on LatestLY on May 19, 2023 01:19 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).