Tax Collected at Source (TCS) under Liberalised Remittance Scheme for the sale of overseas tour packages and any other remittance (such as for bonds, shares, and real estate gifts) through the usage of international credit cards is set to rise from this July.
TCS for these cases will be now at 20 per cent against the earlier 5 per cent. However, TCS for education and medical treatment remains unchanged at their respective slab.
For TCS on remittance for travel and incidental expenses related to education and medical treatment, the rates of TCS as applicable to remittances for education and medical treatment, respectively, shall apply, said the Finance Ministry in a series of FAQ on Thursday, adding that a detailed clarification will be issued separately.
The Finance Ministry said the changes were necessitated as some instances have come to notice where the LRS payments were “disproportionately high” when compared to the disclosed incomes.
In the FAQ, the ministry said the primary impact will only be on investment in assets such as real estate, bonds, and stocks outside India by High Net Individuals and tour travel packages or gifts to non-residents.
Under the Liberalised Remittance Scheme, all resident individuals, including minors, are allowed to freely remit up to USD 2,50,000 per financial year (April – March) for any permissible current or capital account transaction or a combination of both.
The Scheme was introduced on February 4, 2004, with a limit of USD 25,000. The LRS limit has been revised in stages consistent with prevailing macro and micro economic conditions. There are no restrictions on the frequency of remittances under LRS.
The government has reportedly amended rules under the Foreign Exchange Management Act (FEMA), which has brought credit card spending outside India under the LRS.