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The tax department will soon come out with a clarification in the form of FAQs to distinguish between expenses incurred on personal visits and business trips for levy of 20 per cent TCS on overseas credit card spends from July 1, a senior official said on Friday.
Following a notification which brought credit card spends under LRS, concerns have been raised on how personal and business expenses would be segregated by the banks who will be required to deduct the TCS on such expenses.
Finance ministry joint secretary (Tax Policy and Legislation) Raman Chopra said the government would soon issue a clarification on the mode of applicability of the TCS provision.
“There has been a lot of discussion with the finance secretary, the revenue secretary and the finance minister. We are certainly going to come up with some clarifications and FAQs on that and that will clarify the position beyond any reasonable doubt in what manner TCS is to be collected and to what extent threshold is available on which it is not to be collected,” Chopra said at a CII event.
He was replying to a question on how the tax department is going to differentiate between business visit and personal visit for the purpose of TCS levy on credit card spends.
The issue of TCS on credit card spending came into the spotlight after the May 16 notification of the finance ministry, which in effect brought use of international credit cards for meeting personal expenses by a person when he is abroad or while making online payment in foreign exchange under the RBI’s liberalised remittance scheme (LRS).
Under LRS, individuals can remit money abroad up to USD 2.5 lakh annually. Any spending beyond the specified amount would need RBI approval.
Since overseas remittance under LRS would attract a 20 per cent TCS from July 1, credit card spends too were brought under TCS.
The notification evoked criticism following which the finance ministry issued a statement on May 19, saying that credit card spends above Rs 7 lakh per annum only would come under LRS. However, a formal notification detailing the threshold is yet to be issued by the government.
The issue concerns payments through credit cards only as debit cards payouts were treated under LRS even earlier.
In 2021-22, a total of USD 19.61 billion was remitted under LRS, up from USD 12.68 billion in 2020-21. In 2022-23, it rose to more than USD 27.14 billion (Rs 2.24 lakh crore), of which overseas travel accounted for more than half of the total.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
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