Govt postpones implementation of revised TCS rule to October 1 from July 1

The Ministry of Finance said overseas spending using international credit cards will not be included under the Liberalised Remittance Scheme (LRS) and hence, would not attract TCS.

Also, the implementation of a higher rate of tax collected at source (TCS) of 20 per cent on overseas remittances under LRS, like tour expenses, has been deferred by three months and will come into effect from October 1 instead of July 1, 2023.

However, credit card spending overseas will not attract TCS from October 1.

The higher TCS rate will be applicable only when the LRS payments exceed the threshold of INR 7 lakh.

The government, in Finance Bill 2023, had increased the rate of TCS from 5 per cent to 20 per cent for remittance under LRS as well as for the purchase of overseas tour programme packages and removed the threshold of INR 7 lakh for triggering TCS on LRS.

These two changes were not applicable when the remittance is for education or medical purpose. These amendments were to take effect from July 1, 2023.

In response to the comments and suggestions, it has been decided to make suitable changes. Firstly, it has been decided that there will be no change in the rate of TCS for all purposes under LRS and for overseas travel tour packages, regardless of the mode of payment, for amounts up to INR 7 lakh per individual per annum.

‘It has also been decided to give more time for the implementation of the revised TCS rates and for inclusion of credit card payments in LRS,” the finance ministry said. For the purchase of an overseas tour programme package, the TCS shall continue to apply at the rate of 5 per cent for the first INR 7 lakhs per individual per annum; the 20 per cent rate will only apply for expenditure above this limit, the ministry added.

“For purchase of overseas tour program package under Clause (ii) of Sub-section (1G), the TCS shall continue to apply at the rate of 5% for the first INR 7 lakh per individual per annum and the 20% rate will only apply for expenditure above this limit,” the ministry said. (Source Business Today)