Government Withdraws Proposal to Include Overseas Credit Card Transactions in LRS, Cancels 20% TCS

The central government has made a significant announcement reversing its decision to include credit card transactions made overseas under the purview of the Liberalized Remittance Scheme (LRS). Consequently, individuals who conduct credit card transactions abroad will not be liable to pay the proposed 20% Tax Collection at Source (TCS).

Previously, the government had proposed to bring credit card transactions made overseas within the ambit of the LRS, thereby subjecting them to a 20% TCS. This proposal was scheduled to come into effect on July 1. However, in a recent development, the government has decided to revoke this proposal entirely.

The decision to withdraw the proposal was influenced by concerns raised by experts and banks regarding the increased compliance burden and the unpreparedness of reporting systems to implement the differential TCS levies for various categories, including medical, education, and overseas tour packages.

“To address the concerns raised and allow banks and card networks ample time to establish the necessary IT-based solutions, the government has decided to cancel the implementation of its earlier e-gazette notification issued on May 16, 2023,” stated a spokesperson from the finance ministry.

The government will not proceed with the proposed legislative amendment that aimed to bring credit card transactions made overseas under the LRS. Thus, individuals will not be required to pay TCS on such transactions.

However, the finance ministry has stated that foreign transfers up to Rs 700,000 per year under the LRS will not be subject to tax collection at source. For the purchase of overseas tour program packages, a 5% TCS will be levied for the initial Rs 700,000 per individual per year. Expenditures exceeding this limit will be subject to a higher rate of 20%, as per the ministry’s announcement.