Starting from July 1, 2023, any payment made through credit card to foreign vendors will be subject to a tax collected at source (TCS) of 20 per cent regardless of the amount paid, as per the new budget for the year. The Liberalised Remittance Scheme (LRS) has raised the TCS from five per cent to 20 per cent, resulting in the new regulations.

While presenting the Finance Bill 2023 for approval in the Lok Sabha, Finance Minister Nirmala Sitharaman mentioned that cross-border credit card payments were not previously included under the LRS and were exempt from TCS. However, the RBI will now ensure that these transactions are under the ambit of TCS.

If credit card payments for overseas tour packages come under LRS, then all transactions using credit cards, including payments for hotel, airline bookings, gaming, subscriptions to software/magazines/memberships, will attract TCS at a rate of 20 per cent. Taxpayers must claim a credit for such TCS in their tax returns.

NCR DELHI TEAM