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With banks yet to be ready for the new system, the Finance Ministry on Wednesday deferred the new mechanism of Tax collected at Sources (TCS) on Liberalised Remittance Scheme beyond a certain threshold to October 1 from July 1. The Ministry also said that no TCS will be applicable on international credit card spending abroad.
However, there will not be any change in the rate to be applicable from October 1.
A Finance Ministry statement said that to give adequate time to banks and card networks to put in place requisite IT-based solutions, the Government has decided to postpone the implementation of its May 16 e-gazette notification. “This would mean that transactions through International Credit Cards while being overseas would not be counted as LRS and hence would not be subject to TCS,” it said while adding that the Press release dated May 19 stands superseded.
“Threshold of Rs. 7 Lakh per financial year per individual in clause (i) of sub-section (1G) of section 206C shall be restored for TCS on all categories of LRS payments, through all modes of payment, regardless of the purpose,” the Ministry said while clarifying for first ₹7 Lakh remittance under LRS there will be no TCS.
Beyond this ₹7 Lakh threshold, the TCS rate would be 0.5 per cent if remittance for education is financed by an education loan and 5 per cent in case of remittance for education/medical treatment. For other expenses, it would be 20 per cent. For purchase of overseas tour program packages, the TCS will remain at 5 per cent for the first ₹7 lakhs per individual per annum; the 20 per cent rate will only apply for expenditure above this limit, added the Ministry.
“The increase in TCS rates, which were to come into effect from July 1 will now come into effect from October 1. Till September 30, earlier rates (prior to amendment by the Finance Act 2023) shall continue to apply,” it said.
The Ministry also said that legislative amendment in this regard shall be proposed in due course. Circular and FAQs shall be issued to clarify various practical issues in implementing this provision.
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