While the Union government has justified the hike in the tax collected at source on overseas credit cards claiming it mainly affects the rich, it is being criticised for burdening the middle class.
As per the announcement made in Budget 2023, the Tax Collected at Source (TCS) rate on foreign remittances, including bookings for tour packages, will rise sharply from 5 per cent to 20 per cent of the total transaction amount from July 1, 2023.
Spending in foreign exchange through international credit cards will be covered under the RBI’s liberalised remittance scheme (LRS), under which a resident can remit money abroad up to a maximum of $2.50 lakh per annum without the authorisation of the Reserve Bank, as per a Finance Ministry no
According to a Finance Ministry notification, an Indian resident can remit money abroad up to a maximum of $2.50 lakh per annum without the authorisation of the RBI. Any remittance beyond that in foreign currency would require approval from the RBI.
The finance ministry, in consultation with the RBI, has omitted Rule 7 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000, thus including forex spending through international credit cards under LRS