Payments using international debit or credit cards upto ₹7 lakh will not be part of the Liberalised Remittance Scheme (LRS) and will not attract Tax Collected at Source (TCS), the Finance Ministry clarified on Friday.
Meanwhile, transactions through UPI (Unified Payment Interface) exceeding ₹7 lakh by Indians abroad will be treated at par with international credit or debit card. Accordingly, it will attract TCS, a senior Finance Ministry official told businessline.
The official also clarified that though LRS does not cover business visits of employees, this rule will not be applicable in case of use of personal credit cards by employees on a business trip.
At present, Indians travelling to Singapore, UAE, Nepal and Bhutan can use UPI for payments to merchants there, provided they have a local QR code. Just like international debit cards, users can make the UPI payments in the foreign currency from their Indian bank.
“Payment abroad through UPI will be part of LRS,” the official said. Under LRS, all resident individuals, including minors, are allowed to freely remit up to $2,50,000 per financial year for any permissible current or capital account transaction or a combination of both. Further, resident individuals can avail of foreign exchange facility within the limit of $2,50,000 only. The scheme is not available to corporates, partnership firms, HUF, Trusts etc.
On May 16, the Finance Ministry notified omission of a rule in Foreign Exchange Management (Current Account Transactions) 2000. With this, exemption given to the use of international credit cards for meetingexpenses by a person when he is abroad was removed. The official reiterated that credit card transactions were already covered under this provision besides use of international debit card abroad. “The notification only adds the expenditure on credit cards while abroad to LRS. If total expenditure on LRS exceeds ₹7 lakh as of now, they will be taxed at 5 per cent and 20 per cent post July 1 on every $ spent,” the official said.
Further, details about TCS on credit card spend will be available in a statement issued by bank. This will help the cardholder take credit of TCS while filing income tax returns. As on February 2023, number of credit cards issued is over 8 crore and debit card is over 95 crore, which include international cards.
Spending through card on business trip
On Thursday, the Ministry said that LRS will not cover business visits of employees. When an employee is being deputed by an entity for business purpose, and the expenses are borne by the latter, such expenses will be treated as residual current account transactions outside LRS and may be permitted by the Authorised Dealers (AD) without any limit, subject to verifying the bona fide of the transaction.
Now, what happens when an employee is using personal card on business trip for business and personal use? The official said:”It will not be possible to differentiate. An expenditure on a personal credit card would be treated as expenditure by individuals.