Govt imposes 20% TCS on international credit card spending

Government has hiked the Tax Collected at Source (TCS) on international credit card spending from 5% to 20%. The government in a notification announced that any spending via international credit cards outside India will come under the Liberalised Remittance Scheme (LRS).

The central government has amended the Foreign Exchange Management Act, thus bringing the credit card spending under the LRS. This amended rule would be applicable from 1st July 2023. Earlier, only debit cards, forex cards and bank transfers were alone included under the LRS and not credit cards.

While this move is expected to help the government in keeping track of overseas spending, it has received huge backlash on social media. Tax experts have raised their concerns over the hike in TCS as this would affect a lot of business travelers who spend on behalf of the company. Tax expert Ajay Rotti took to twitter and said that the proposed TCS is not a good idea from the perspective of ease of business.

Ajay Rotti
@ajayrotti

Dear @nsitharaman - TCS on international use of credit cards is not something you should go ahead with. It impacts a lot of business travelers who spend on behalf of the company. It serves no purpose with TCS on the employees name and it can't be on company name!

TCS is being introduced for collection of data on transactions and not as a tax. Banks can be asked to share data of Credit card transactions. TCS as proposed is not a good idea from the perspective of "ease of business"

While this move is introduced to increase RBI's hold on foreign remittances, experts believe that this 20% TCS rule would lead to high cash flow issues from High net-worth individuals.