Finance Ministry New Rules: The Finance Ministry has said that the purpose of changing the FEMA law to bring the expenses incurred abroad from International Credit Cards under the purview of the LRS scheme is to bring uniformity in the tax aspects of the amount sent by debit and credit cards.
Is. The Finance Ministry said in a statement on Thursday that through the Foreign Exchange Management (FEMA) Amendment Rules, 2023, spending abroad through credit cards has also been included in the LRS scheme of the Reserve Bank of India (RBI).
New rates will be applicable from July 1
This will enable ‘Tax Collection at Source’ (TCS) at the applicable rates on the amount spent abroad. If the person paying TCS is a taxpayer, he can claim credit or set-off against his income tax or advance tax liabilities. In this year’s budget, it was proposed to increase TCS from five percent to 20 percent on foreign tour packages and money sent abroad under LRS. The new tax rate will be effective from July 1.
Amendment made in the FEMA law
The ministry had issued a notification in this context on Tuesday itself and informed about the amendment in the FEMA law. Post inclusion of LRS in this notification, any remittance of foreign currency above Rs 2.5 lakh will require RBI approval. Prior to this notification, international credit card payments for expenses incurred while traveling abroad were not eligible for LRS.
Removed Section 7
The Ministry of Finance, in a notification issued after consultation with RBI, has removed Section 7 of the FEMA Act, 2000. Due to this, payments made abroad through international credit cards have also come under the ambit of LRS.
Answers given by the Ministry
The Ministry has tried to clarify the situation by releasing a list of related questions and their answers on this change. It said that debit card payments were already covered under the LRS, but credit card expenses abroad did not come under this limit. Because of this many people used to cross the LRS limit.
RBI wrote a letter to the government
Data received from companies providing the facility of sending money abroad revealed that international credit cards are being issued with permission to spend more than the current LRS limit of Rs 2.50 lakh. According to the ministry, the RBI had also written to the government several times that the differential treatment of foreign debit and credit payments should be done away with.