Thank you for sharing the details!Effective from May 16, 2023, all international transactions made using credit cards will now fall under the Liberalized Remittance Scheme (LRS). Furthermore, a 5% Tax Collected at Source (TCS) will be applicable on all international transactions until July 1, 2023.
#FEMA 2000 rule no 5 & 7:
# official Gazette of GOI, department of economic affairs: notified rule 7 (of FEMA 2000) has been omitted
Currently, a 5% Tax Collected at Source (TCS) will be applicable on transactions exceeding the threshold of Rs. 7 Lakhs in a financial year. This means that if your total spending is below Rs. 7 Lakhs till 1st July, 2023, no TCS will be charged. However, if your spending reaches Rs. 8 Lakhs, the 5% TCS will be applicable only on the amount exceeding Rs. 7 Lakhs, which is Rs. 1 Lakh in this case.
Starting from July 1, 2023, a 20% Tax Collected at Source (TCS) will be applicable on all international transactions conducted using Indian credit cards. Whether you are purchasing a holiday package or indulging in shopping, you will be required to pay a 20% TCS. However, you will have the option to adjust this amount while filing your Income Tax Return (ITR).
Effective immediately, all credit card transactions will be subject to the applicable Liberalized Remittance Scheme (LRS) rules. This means that any total transactions exceeding USD 2.5 lakh or its equivalent in foreign currency will require prior approval from the Reserve Bank of India (RBI).
Furthermore, a 5% Tax Collected at Source (TCS) will be applicable on transactions falling under the medical and education categories, but only for amounts exceeding 7 lakhs. For instance, if you make a payment of Rs. 9 lakhs towards educational institution fees, the 5% TCS will be charged on Rs. 2 lakhs (the amount exceeding 7 lakhs).
Reference/Source: FEMA (Current Account Transactions) Rules, 2000
My understanding for ease of reference for other members:-
The notification referred in this post said that rule 7 of the Foreign Exchange Management (Current Account Transactions) Rules, 2000 has been omitted, which brings the usage of international credit cards towards meeting expenses on a visit outside India under LRS.
The notification brings transactions through credit cards outside India under the ambit of the LRS with immediate effect, which enables the higher levy of TCS, as announced in the Budget for 2022-23, from July 1.
It may be noted that the use of credit cards in foreign countries while travelling was not included under the LRS before. It earlier included debit card, forex card and bank transfers.
