TCS rule 2023
TCS rule: Credit card holders may need to file a declaration with the issuer bank within a stipulated time, highlighting the nature of expenses incurred in foreign currency.
The tax department is considering this move for the purpose of levying Tax Collection at Source (TCS), reported news agency PTI quoting sources familiar with the development.
The Income Tax department is also in talks with the Reserve Bank of India (RBI) and other stakeholders to come up with a mechanism for distinguishing whether the expense is towards medical/education, which attracts a five per cent TCS or for other purposes on which a 20 per cent TCS would be levied, the sources added.
Discussions are also going on around giving additional time to taxpayers for filing declarations to the credit card issuer bank, specifying the nature of expenditure from July 1, 2023 – the date from which the new TCS rule comes into effect.
The tax department is expected to issue a detailed FAQ on modalities for the levy of TCS at the specified rate.
What is the new TCS rule?
From next month, overseas expenses on credit cards exceeding Rs 7 lakh will attract 20 per cent TCS. However, if such expenses are incurred for medical or educational purposes, the TCS levy would be capped at 5 per cent.
A lower TCS rate of 0.5 per cent would be levied above the Rs 7-lakh threshold for those available loans for overseas education.
In the Union Budget 2023-24, the TCS rates were hiked to 20 per cent from the current 5 per cent on overseas tour packages and funds remitted under the Liberalised Remittance Scheme (LRS).
In May, the government introduced changes to the FEMA Current Account Transaction Rules and included overseas credit card expenses under the ambit of LRS, under which a resident can send money abroad up to a maximum of USD 2.50 lakh per annum. Anything beyond the threshold would require approval from the RBI.
Following the inclusion of credit card expenses under the ambit of LRS, concerns were raised by the public.
This prompted the finance ministry to issue a clarification that any payments by an individual using their internal debit or credit cards up to Rs 7 lakh per financial year will be excluded from the LRS limits and will not attract any TCS.