No Tax Collected On Overseas Spending Of Upto Rs 7 Lakh Via Debit, Credit Cards: Finance Ministry

The government on Friday announced that no tax will be charged on overseas spending of up to Rs 7 lakh in a year. Irrespective of usage of a debit or credit card tax will not be levied. It looked that the government backed from its earlier decision of levying the tax collected at source (TCS) on all spending.

The government had earlier this week brought overseas credit card spending under Liberalised Remittance Scheme (LRS), as per the PTI report. This meant that any spending using credit cards overseas would attract a 20 per cent tax from July 1.

Debit card spending was already part of LRS. However, the move to levy TCS attracted criticism with some calling it "tax terrorism".

Later on Friday evening, the government announced no TCS will be deducted on the spending of up to Rs 7 lakh overseas using any debit or credit card.

Although, concerns have been raised about the applicability of Tax Collection at Source (TCS) to 'small transactions' under the Liberalised Remittance Scheme (LRS) from July 1, 2023.

"To avoid any procedural ambiguity, it has been decided that any payments by an individual using their international Debit or Credit cards up to Rs 7 lakh per financial year will be excluded from the LRS limits and hence, will not attract any TCS," the ministry explained.

Today's clarification by the ministry means that overseas payments exceeding Rs 7 lakh a year through international credit and debit cards will be subject to TCS levy at the rate of 20 per cent with effect from July 1.

Currently, overseas medical treatment and education expenses up to Rs 7 lakh a year is exempt from TCS. A 5 per cent levy is charged on expenses exceeding Rs 7 lakh. For those who availed of education loans, the rate of TCS is 0.5 per cent. "Existing beneficial TCS treatment for education and health payments will also continue," the ministry said.